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New Jersey Orders Second Firm to Stop Selling Crypto Products

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What You Need to Know

  • Celsius was ordered to stop selling products involved in lending and trading cryptocurrencies.
  • The state says the accounts, in which customers deposit crypto and are paid interest, are unregistered securities.
  • In July, the New Jersey Bureau of Securities ordered BlockFi, a bank-like crypto platform, to stop selling unregistered securities.

Cryptocurrency lending platforms are in the crosshairs of regulators. Just days after the Securities and Exchange Commission served a Wells notice on Coinbase for its planned crypto lending platform, the New Jersey Attorney General’s office announced that the state’s Bureau of Securities has issued a cease and desist order against Celsius Network LLC.

Celsius has been engaged in lending and proprietary trading activities in cryptocurrencies, which are unregistered securities and therefore violate New Jersey securities law, according to the AG’s office, which oversees the Division of Consumer Affairs and its subdivision, the Bureau of Securities. The AG’s office said Celsius has raised “at least $14 billion through those sales.”

It was the second time in less than two months that the New Jersey agency has taken action against a cryptocurrency firm for selling unregistered securities. In July the bureau issued a cease and desist order to stop BlockFi, a bank-like crypto platform, from selling unregistered securities in the form of interest-earning cryptocurrency accounts.

Celsius solicits investors to invest in its Earn Rewards accounts by depositing certain eligible cryptocurrencies, including Bitcoin and Ethereum, that it then pools together to fund various income-generating activities, including lending and proprietary trading. In exchange, investors in Earn Rewards are promised a weekly interest rate paid in the same token as their original investment or, in some cases, in CEL, the Celsius native digital token, which is available for only non-U.S.-based account holders.

The Celsius website fails to disclose that Earn Rewards is not registered with any federal or state securities regulator even though, as a purveyor of securities, it is required by law to do so, according to the attorney general’s office.

“Financial companies operating in the cryptocurrency marketplace are on notice,” Acting Attorney General Andrew Bruck said in a statement. “If you sell securities in New Jersey, you need to comply with the New Jersey’s investor-protection laws. Companies dealing in cryptocurrencies are not immune from oversight.”