Celsius Network users aren't the only one who wants to know why the company froze withdrawals.
State security boards in Alabama, Kentucky, New Jersey, Texas, and Washington were recently reported to have launched investigative probes into the cryptocurrency lender to learn why it froze withdrawals this week, according to Reuters.
Celsius Network is no stranger to investigative probes from state and federal officials, with multiple states ordering the company to stop selling "high-yield crypto products" due to the risk associated with them, per Engadget.
Celsius Network Investigative Probes Details
State securities regulators in the previously mentioned states decided to launch probes into Celsius Network to investigate the company's decision to suspend customer redemptions this week, per the statement of Texas State Securities Board enforcement director Joseph Rotunda.
The officials of the various state securities boards met and began investigative proceedings on the company's freeze on the morning of June 13, with Rotunda considering the probe a "priority."
Rotunda also said that he is anxious that clients and many retail investors may be unable to withdraw from their accounts despite needing immediate access to their assets, which may result in "significant financial consequences."
Alabama Securities Commission Director Joseph Borg also told Reuters that Celsius Network has been "very responsive" to questions from state securities regulators. However, Borg added that the investigation is in its initial stages, and as such, things could still change at this point.
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Borg also added that the US Securities and Exchange Commission (SEC) is also communicating with Celsius Network. However, the SEC has declined to comment on its correspondences to Celsius Network.
A spokesperson for the Kentucky Department of Financial Institutions said it was the SEC's policy to not comment on ongoing enforcement actions and investigations.
Celsius Network and its CEO, Alex Mashinsky, have yet to provide comments on the proceedings.
Celsius' Withdrawal Freezing Decision
Celsius Network mentioned in a memo it would be freezing customers' ability to withdraw, Swap, and transfer funds from their accounts due to extreme market conditions and to put the company in a "better position" to honor its withdrawal obligations eventually.
The company added that its decision of freezing withdrawals is necessary "for the benefit of our entire community" to stabilize liquidity and operations while it takes steps to preserve and protect assets.
Customers will continue to receive rewards during the withdrawal freeze as part of Celsius Network's commitment to them.
"We understand that this news is difficuly, but we believe that our decision to pause withdrawals, Swap, and transfers between accounts is the most responsible action we can take to protect our community," Celsius Network said. " Our ultimate objective is stabilizing liquidity and restoring withdrawals, Swap, and Transfers between accounts as quickly as possible."
The crypto-lending firm is currently facing an apparent liquidity crisis as the price of Bitcoin dropped to levels before the pandemic started, per Quartz.
Celsius Network's business model promises high-yield returns on customer deposits, enticing them with enormous rates for deposits of cryptocurrencies. The company would then loan these deposits to other customers, which are allegedly collateralized in Bitcoin, but it can't assure customers it can pay out when a withdrawal rush happens.
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