Beware Of Crypto Interest-Bearing Accounts – Arizona’s Watchdog

Arizona’s financial regulator has issued a stern warning to crypto investors amid the ongoing market decline. The warning targets crypto investors who have cryptocurrency interest-bearing accounts. 

According to the regulator, some crypto companies may have issues paying the stated returns they owe to investors. This is because their collateral might not be enough to do so.

Arizona’s Watchdog Issues Warning To Crypto Investors 

On the 25th of July, the Arizona Corporation Commission announced a warning to crypto investors. The commission warned them about crypto investment firms that offer interest-bearing crypto accounts.

Elaborating on the matter, the agency talked about crypto-interest accounts. Usually, customers would lend their crypto assets to these firms in exchange for interest. 

The interest paid depends on the value of the crypto assets provided by the lender. However, the crypto market crisis has caused mayhem in the crypto industry. 

Therefore, some of these companies have paused withdrawals on their platforms. Hence, users cannot withdraw their funds or send them to another platform. 

Examples of such lending companies that have paused withdrawals are Celsius, Voyager, and 3AC. Meanwhile, the regulator told investors that some crypto platforms had not informed users about potential risks.

Additionally, the agency said some firms might even overstate the extent that their collateral can protect users’ funds. Recently, the ACC investigated the lending platform, BlockFi.

Upon investigation, the commission noticed that some crypto-interest accounts had unregistered securities. Therefore, the agency decided to investigate other providers of crypto-interest accounts.

Crypto Lenders And Bankruptcy Issues

In July, two famous crypto lenders filed for Chapter 11 bankruptcy. They are Voyager Digital and Celsius Network, who went bankrupt amid the crypto market downturn.

According to the Department of Financial Regulation in Vermont, Celsius is highly insolvent. Therefore, the DoF believes it does not have the liquidity and assets to fulfill its obligations to creditors. 

Also, it is uncertain how the crypto lending platform will pay back investors and account holders. Stephen Ehrlich, the CEO of Voyager, threw more light on the company’s bankruptcy issue.

According to Ehrlich, two main factors have pushed the company to file for bankruptcy. One of them is the prolonged instability in the crypto market which has affected several companies. 

The second reason is the failure of 3AC to pay back the loan it owed Voyager’s subsidiary firm, Voyager Digital, LLC. However, Voyager Digital has filed a case with the court to allow users to withdraw their funds from the platform. 

Besides, FTX had sent a proposal to Voyager to use its platform to conduct withdrawals. However, Voyager has rejected the proposal citing improper valuation.