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Californian DFPI Orders Celsius to Stop Selling Securities

Californian DFPI Orders Celsius to Stop Selling Securities

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Celsius continues to face various state and country regulations after declaring bankruptcy.

Celsius, a cryptocurrency lending platform, is rreceived notice from the California Department of Economic Protection and Innovation (DFPI) to stop offering its services.

By document published on August 8, Celsius is violated Sections 25110 and 25401 of the Companies Act.

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Section 25110 of the Companies Act states that it prohibits “Offering or selling non-required, non-exempt securities in issuer transactions”. In this case, according to the Ministry of Economic Protection and Innovation Earn rewards have been sold or offered by Celsius. These “prizes” are considered securities and must be licensed. Based on the information found in the order, Celsius did not have such documentation.

Celsius also violated Corporation Code Section 25401, which states that a community may not sell or offer securities using false or misleading statements, verbally or in writing. According to the documentation, Celsius used false statements to sell Earn Interest accounts.

Because of these violations, the State of California is ordering Celsius to stop offering or selling its securities.

The California regulator also charges Celsius and its CEO, Alex Mashinsky does not disclose the risks that users may face when depositing digital assets. The following risks are distinguished in the order:

The risk that third-party storage services may lose access to digital assets; the risk that lenders to whom Celsius posted digital asset collateral will not be able to timely return Celsius collateral; the risk that Celsius’ own attempts to liquidate illiquid positions may prevent it from obtaining sufficient funds to fulfill customer withdrawal requests in the event of a sudden withdrawal request.

This is not the first time that the California regulator has imposed such sanctions. Earlier this year, DFPI commissioned BlockFi and Voyager will stop offering their services.

It is worth noting that on July 13 Celsius archived for bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York.

Gile K. - cryptanalyst

by Gile K. – Crypto Analyst, BitDegree


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