Crypto lender Celsius Network has chosen to freeze customer withdrawals and other transactions on Sunday, preventing its nearly two million users from accessing their funds. Now, state security councils in Alabama, Kentucky, New Jersey, Texas and Washington have launched probes into Celsius, Reuters reports. The SEC has also been in contact with the company. Engadget has contacted the agency and will update if we hear anything.
This is not the first time the cryptocurrency lender has run into trouble with state and federal officials. Multiple states last year ordered Celsius to stop selling so-called high-yield crypto products, which many investors warn are risky because they won’t offer the same FDIC protection as banks if the institutions fail. Currently, residents of New York and Washington states cannot purchase assets on Celsius.
Texas State Securities Board officials first began talking Monday morning about Celsius’s surprise freeze on consumer assets, the agency’s enforcement director Joseph Rotunda told Reuters. “I am deeply concerned that clients – including many retail investors – may need immediate access to their assets but not be able to withdraw funds from their accounts. The inability to access their investment could have significant financial consequences have,” he said.
In its memo to users explaining Sunday’s decision, Celsius cited “extreme market conditions” as the main motivator. The freeze includes transfers, withdrawals and swaps between accounts. “We are taking this action today to put Celsius in a better position to meet its withdrawal obligations over time,” the company wrote.
Users took to social media this weekend, often sharing the negative impact of the freeze on their own finances. A user claimed on Twitter that the platform liquidated a loan worth more than $27,000 because they had no access to funds to pay or place collateral. “This is not the reason I have written myself off my bank,” they wrote.
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