Celsius Network is reportedly under investigation following its decision to suspend withdrawals, swaps and transfers between accounts. Texas State Securities Board Director of Enforcement Division Joseph Rotunda said Alabama, Kentucky, New Jersey, Texas and Washington regulators are probing the crypto lending platform.
"I am very concerned that clients, including many retail investors, may need to immediately access their assets, yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences," Rotunda said.
He further confirmed to the crypto news site Cointelegraph that the enforcement division is "looking at the issues involving the frozen accounts." Media outlets reported last week that Celsius has "lost major backers and onboarded new attorneys amid a volatile crypto market."
The investigation was allegedly called after the Wall Street Journal (WSJ) reported on June 16 that two big firms are unlikely to provide more funds to Celsius due to potential risks.
Growth-equity firm WestCap Group and Canadian pension fund Caisse de dépôt et placement du Québec led a $750 million Series B funding round for Celsius, which helped the platform reach a $3.5 billion valuation last year. Now, these firms are not feeling generous.
"Few are feeling okay about things," said one person with knowledge of the discussions between Celsius and its investors. "There was more risk in this than fully appreciated."
The crypto lending platform has also onboarded the law firm Akin Gump Strauss Hauer & Feld LLP to work on solutions to its current financial crisis. Celsius CEO Alex Mashinsky tweeted on Wednesday, June 15, that his team is working hard to address concerns.
"@CelsiusNetwork team is working non-stop. We're focused on your concerns and thankful to have heard from so many. To see you come together is a clear sign our community is the strongest in the world. This is a difficult moment; your patience and support mean the world to us," he said.
Following the announcement to pause withdrawals, Celsius' native token CEL fell by 70 percent in an hour from $0.49 to $0.15.
Bitcoin and other cryptocurrencies are collapsing
Cryptocurrency is reported to be very volatile recently. Bitcoin, the most used and popular cryptocurrency, has crashed more than 10 percent this week – falling below $25,000 for the first time since December 2020 and dropping more than 60 percent in the last seven months.
Movements in the price of bitcoin are based purely on speculation among investors about whether it will rise or fall in the future. So there can be violent swings in its price, even within a 24-hour period. This could have caused Celsius' withdrawal suspension.
Plummeting global stocks, inflation and interest rate hikes have made it more expensive for businesses to borrow money. This has spilled into the cryptocurrency market. There have been sudden sell-offs of major cryptocurrencies due to panic and fear over further regulations.
Other events may have contributed to the sudden fall of bitcoin. One happened this month when Binance, one of the world's largest cryptocurrency exchanges, suspended bitcoin withdrawals.
Tesla CEO Elon Musk said in May 2021 that the electric vehicles manufacturer would no longer accept digital payment transactions due to concerns about the impact of cryptocurrency "mining" on the environment.
Cryptocurrency mining may be detrimental to the environment because the energy-intensive process requires vast amounts of electricity to constantly power millions of servers.
In August last year, a hacker stole $600 million in a cyber attack targeting the crypto platform Poly Network. Four days later, the hackers returned more than half of the money, saying they did it to "expose the vulnerability" in the system before others did.
In the same month, the International Monetary Fund issued a warning to countries using cryptocurrencies as legal tender, saying its widespread use would threaten "macroeconomic stability" and could harm financial integrity. (Related: The crypto apocalypse is here.)
Visit BitcoinCrash.news for more news related to the plummeting cryptocurrencies.
Watch this video that reports about the drop in crypto's value as Celsius freezes withdrawals.
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