Celsius is Banned from Selling Securities in California

  • Celsius is facing multiple lawsuits from customers accusing it of fraudulent practices.

The Department of Financial Protection and Innovation of California has issued a cease and refrain order to the embattled crypto lending platform, Celsius. The California-based regulator had previously issued a similar sanction against Voyager and BlockFi. The DFPI said this move was in line with its plans to sanction crypto service providers that fail to comply with local laws.

The order directs Celsius to cease all future activity regarding the sale and marketing of securities in the state of California. The lending platform and its CEO, Alex Mashinsky, were accused of misrepresenting and omitting material information in the provision of cryptocurrency interest accounts, notably by downplaying the risks associated with making a deposit of digital assets.

The California regulator further claimed that Celsius failed to disclose that lenders would be unable to promptly return Celsius’ collateral and that it would not have enough assets to meet customer withdrawal demands in the event of an unexpected request for withdrawals. The department also added that the crypto lender failed to mention the risk that third-party custody services might end up losing access to digital assets.

Celsius is also accused of breaking California law, specifically Corporations Code Section 25110, by failing to qualify the deposited digital assets as securities. A part of the cease order said,

The Commissioner is further of the opinion that Mashinsky is a person who with knowledge
directly or indirectly controlled and induced Celsius, and/or is a person who knowingly provided
substantial assistance to Celsius to violate Corporations Code sections 25110 and 25401.

Celsius has faced different allegations since it filed for bankruptcy. Many of its victims have accused the lending platform of fraud, and some have taken legal action, seeking a refund of their investment. Celsius is now facing a mountain of legal cases from customers who have lost faith in it.

A group of custody clients recently took legal action in search of a refund of their collective deposit worth $180 million. Additionally, U.S.-based law firm Braga Eagel & Squire, P.C. filed a class action suit against the crypto lender and its CEO, Alexander Mashinsky.

Celsius is also facing another class action lawsuit filed by Jason Stone, a former investment manager at the firm. Stone accused the company of manipulating the crypto market and engaging in a Ponzi-like scheme by persuading investors to buy its financial products at inflated prices while selling unregistered securities.

To worsen its legal concerns, several states in the US, including Washington, Kentucky, Alabama, New Jersey, and Texas, are heavily investigating the bankrupt Celsius.

Lawrence Woriji Verified

Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.

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