Cease and desist letters were sent to two crypto lending companies by the New York Attorney General Letitia James on October 18. Three more companies were contacted for details on corporate ownership and how user deposits were handled.
A cease-and-desist letter was sent by Nexo Financial LLC, and a request for additional information came to Celsius Network LLC, according to a source familiar with the situation, but James did not identify the companies.
Regulation Rears its Ugly Head Again
The names of the companies under investigation have been changed by the OAG. Cease and desist letters still used the titles “Nexo Letter,” while information requests were called “Celsius Letter” when they were first published, but OAG files later changed that. Two of the biggest loan platforms are implicated by the names.
According to the Nexo cease-and-desist letter, the OAG deemed the company’s refusal to register as a broker-dealer a Martin Act violation. Competitor BlockFi has been unavailable since 2020 in New York.
The Celsius letter, on the other hand, was more circumspect, giving the company until November 1 to submit details on its ownership structure, investment plan, and method of safekeeping for cryptocurrency deposits. The names of the other three companies that received letters from NYAG have not been released.
What is Celsius?
After being valued at over $3 billion, Celsius just completed a $400 million financing round. State securities authorities in Alabama, Kentucky, New Jersey, and Texas — all of whom have targeted crypto lender BlockFi — have issued stop and desist or show-cause orders, yet the company continues to operate.
Celsius enables users to make money by earning interest on the bitcoin they own. Moreover, the advertised yearly return is up to 17%; nevertheless, the rates fluctuate according to the asset.
The native Celsius tokens, stablecoins, and a plethora of other crypto assets may also be deposited, in addition to the usual suspects like Bitcoin and Ethereum. After that, Celsius loans those coins out and takes a share of the profits from the depositors.
After the Securities and Exchange Commission (SEC) allegedly threatened to sue, Coinbase, which was developing its own version of Lend, said it would go to court if necessary. In the end, Coinbase decided to discontinue the offering.