California’s DFPI imposes a desist and refrain order on Celsius Network

The Department of Financial Protection and Innovation (DFPI) of California has now imposed a desist and refrain order on troubled crypto lending platform Celsius Network. As a result, the company will be prohibited from selling and promoting securities in the state of California.

The “Earn Rewards” accounts that Celsius offers and sells are allegedly securities, despite the fact that the department has not obtained a permit to authorize the operations. The DFPI also discovered that Celsius offered accounts that let its customers earn income on the digital assets they deposited. However, it did not classify those accounts as securities in accordance with Corporations Code Section 25110 of California law.

Moreover, the regulator said that the company and its CEO Alexander Mashinsky had hidden critical information about its operations and Earn Rewards. According to the order from August 8, Mashinsky made statements that were “materially” false. Additionally, it mentioned executive’s statements, before the company’s suspension of user wallets on June 12, saying that Earn Rewards investors would be able to timely withdraw their assets and would not suffer losses on their investments.

Previous cease and desist orders by DFPI 

The allegations come a month after the DFPI issued two cease and desist orders to BlockFi and Voyager, two other crypto lending companies that were badly affected by the crypto winter.

Other than California’s DFPI, several state agencies are also looking into the platform right now. One such claim was made against Celsius by the Department of Financial Regulation (DFR) of Vermont, who claimed that Celsius had offered unregistered securities to retail investors. The watchdogs asserted that the company is “deeply insolvent” and lacks the resources to fulfill its debts to account holders and other creditors.

Notably, on June 25, the lender put a halt to customer withdrawals from the interest accounts. A few weeks later, Celsius Network filed for Chapter 11 bankruptcy, as TheCoinRise reported.