Celsius May Be In Hot Water With State Security Regulators Over Its Withdrawal Suspension

Crypto lending platform, Celsius Network, recently raised red flags of concern from users and state security regulators after suspending withdrawals, swaps, and transfers.

On Sunday, June 12 at 10:10 p.m. EDT, popular crypto lending platform, Celsius Network, announced the suspension of withdrawals, swaps, and transfers between accounts to its 1.7 million users. The company is explaining the halt as a decision made for the Celsius community's best interest. As a result of the volatility of the current crypto market, they deem the pause necessary to stabilize liquidity and operations.

As concerns from many are flooding in, Celsius CEO, Alex Mashinsky, took to Twitter addressing concerns of its customers. He wrote, "Celsius Network team is working non-stop. We're focused on your concerns and thankful to have heard from so many. To see you come together is a clear sign our community is the strongest in the world. This is a difficult moment; your patience and support mean the world to us."

Five states consider the investigation a priority

State security regulators have quickly caught wind of the company's abrupt decision, and have begun initial stages of investigation. U.S. states Alabama, Texas, New Jersey, Washington, and Kentucky are investigating and voicing concern for clients and investors. Enforcement director at the Texas State Securities Boards, Joseph Rotunda, made a statement regarding his concern. He said, "I am very concerned that clients -- including many retail investors -- may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences."

Rotunda and Alabama Securities Commission Director, Joseph Borg, confirmed that officials are considering this a priority and started the investigation in five states on Monday.

Stress from the current crypto market

The recent withdrawal suspension is unfortunately not the only evidence that Celsius is responding to significant stress from the buoyant crypto market. In September 2021, Texas State Securities scheduled a hearing related to security and registration allegations against Celsius. A Wall Street Journal report stated that during the November 2021 funding round, two of the company's major financial backers did not plan on providing additional funding due to potential risks. Celsius has also reportedly hired attorneys to help find solutions to their current financial struggles.

The bottom line

As Celsius faces the immense pressure of the current crypto market, their decision to pause withdrawals, swaps, and transfers has led five states to open investigations of the lending platform. As concern of the company's stability increases, its token has plunged in value. The value of the token went from $0.36 to $0.10 within less than two hours on Sunday night, dropping more than 60% before regaining some ground on Monday morning.