Kentucky Sends Crypto Lending Platform Cease and Desist Order

The security regulators from Texas and New Jersey cracked down against a crypto lending platform called Celsius six days ago. The Alabama Securities Commission also decided to join in and a cease and desist order was filed against the platform. Now, it appears that the state of Kentucky has decided to go down the same path because a cease and desist order was also filed there against the crypto lending platform. Hence, it appears that four states in the United States have an issue with Celsius, as the interest-bearing accounts of the crypto lending platform seem to be a point of contention. 

Blockfi, another crypto lending platform, has also been suffering from the same issues, as the company had received multiple cease and desist orders from states because of its interest-earning accounts. After Texas, New Jersey and Alabama, Celsius has now received the same warning from Kentucky to stop ‘soliciting or selling’ these accounts to people in the state. Like the other state regulators that oversee the securities departments, those in Kentucky also categorize the interest-bearing accounts as securities. The cease and desist order that was sent to Celsius highlighted that the department believed they were offering securities to their clients in the form of investment contracts and require a deposit of assets in exchange.

Passive investors are able to use these investment accounts for earning interest on the assets they deposit with the company. Thus, they are classified as securities under the Act. As opposed to Blockfi, the Celsius Network has not turned to its blog channel or its Twitter for responding to the allegations filed against it by several state regulators. The co-founder of the crypto lending platform had recently discussed the issues associated with the authentication methods of Facebook, the cease and desist order from Kentucky hadn’t been discussed. According to the securities’ watchdog in Kentucky, the company’s investors are exposed to additional risks. 

Similar arguments have been used by all four states and they all claim the same risks associated with the accounts offered by Celsius. As far as Blockfi is concerned, this crypto lending platform had encountered trouble with regulators in Alabama, Vermont, Texas and Kentucky. Furthermore, state security regulators may also decide to take action against other crypto platforms that are also offering crypto accounts that generate interest. So far, Celsius has chosen not to give a response to the allegations of the state regulators, despite being contacted for this specific purpose. 

However, a spokesperson for Celsius did say that the company was thoroughly disappointed with the actions that had been filed against them and were not in agreement with the allegations made. This argument about cryptocurrencies being securities is nothing new. As a matter of fact, Ripple Labs has had a suit filed against it and its founders by the US Securities and Exchange Commission (SEC), for selling XRP, which the agency regards as security. However, it is promoted as a cryptocurrency by the company and this has resulted in legal trouble.