Lender BTC C adds BlockFi to the list of companies audited by state securities regulators, as we read on its crypto news today.
BlockFi is a New Jersey-based form of crypto credit and has undergone major scrutiny by state securities regulators over the summer, and Coinbase has also been hit by the US Securities and Exchange Commission. Now BTC Lender C is on the regulator’s list of targets. The New Jersey Office of Privacy has filed an injunction against the company to cease providing prime itenrest accounts to all New Jersey customers by the end of October. Today, the Texas State Securities Commission also requested and even ordered the company to hold an administrative hearing to suspend service and cancel orders that are forcing it to stop serving customers in the state. The order also states that fines and money transfers are possible remedies.
The problem is Celsius crypto accounts. Customers can sign up for the platform and deposit the cryptocurrency they own in degrees Celsius to borrow. In return, the customer receives an itneret tariff that is higher than the tariff of a conventional bank savings account. The ad network profit is up to 17%, but the profit level is updated weekly and varies according to the content. Currently, stablecoins like Tether and USDC are earning 8.88%, while Ethereum and BTC are earning around 5-6% per year.
Texas and New Jersey are finding that Celsius’s API affiliate program is reaching these accounts because API partners can offer and sell Celsius’s unregistered interest-bearing account to their customers. None of this was sanctioned by the state, according to regulators, because C had not registered with the agencies or the SEC to begin selling securities as exchangeable investment products. Most lawyers specializing in digital assets consider these return products to be securities because they act like an unsecured bond, where the borrower agrees to repay someone without the need to provide collateral.
The same issue affected BlockFi, which received cease and desist orders from the New Jersey attorney general, followed by cease and desist orders from Texas, Kentucky, and Vermont. As a result, BlockFi’s market reach narrowed, and it stopped offering BlockFi interest accounts to Texas residents and had to stop in New Jersey as well.
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