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Crypto Lender Celsius Told to Stop Offering Accounts in Kentucky

·1-min read

(Bloomberg) -- Kentucky’s securities regulator on Thursday ordered giant crypto lender Celsius Network to cease and desist from offering its interest paying accounts in the state, joining three other states that last week took similar actions.

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In the emergency order, the Kentucky Department of Financial Institutions said Celsius offered customers unregistered securities in violation of state law and didn’t sufficiently disclose to customers what the firm did with their deposits, calling the accounts “an unregulated market that represents an unprecedented risk to consumers.” The order said Celsius can request an emergency hearing to challenge the decision or can appeal it in court.

With the order, Kentucky joins regulators in Texas, Alabama and New Jersey in taking actions against Celsius, which says it has tens of billions of dollars in deposits in interest accounts that sometimes pay double-digit yields. Crypto interest accounts have received intense scrutiny from securities regulators in the past few months, with Kentucky and other states also taking actions against similar accounts offered by BlockFi Inc.

Coinbase Global Inc., the largest U.S. crypto exchange, planned to offer its own version of the accounts, but last week dropped those plans after the Securities and Exchange Commission said it might sue. Securities regulators have argued that the interest accounts, which unlike bank savings accounts carry no federal deposit insurance, should be registered as securities and make more disclosures of their risks to investors.

A Celsius spokesperson said the company is “disappointed these actions have been filed” and disagrees with the allegations. The spokesperson said the company seeks to address the matter quickly and that there are no changes to services to its customers.

(Updates with Celsius statement in last paragraph)

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