On Sunday night, already in freefall in crypto markets, controversial crypto lender Celsius announced that it was abruptly halting all customer withdrawals, swaps and transfers.
“We are taking this action today to better position Celsius to honor its return obligations, over time, to the end,” the company wrote in a blog post on Medium. “We are taking this necessary action for the benefit of our entire community to stabilize liquidity and operations while we take steps to preserve and protect assets. In addition, the customer is in line with our commitment to our customers. Will continue to earn rewards during the pause.”
According to CoinMarketCap, the company’s CEL token reacted quickly, dropping 70% in an hour to $0.15 from a high of $0.49 earlier on Sunday.
Crypto investors on Twitter compared the recent Terra collapse as well as the infamous crypto Ponzi scheme Bitconnect.
The rest of the cryptocurrency market also didn’t have a good day on Sunday when Celsius shared its news, albeit nothing compared to CEL’s dramatic drop. At the time of writing, Bitcoin is down 9% on Sunday, Ethereum is down 9%, BNB is down 9%, Cardano is down 11%, Solana is down 12% and Dogecoin is down 9%.
Celsius launched in 2017 and offers customers high yields for crypto deposits, which it lends to other crypto firms. It shares that business model with BlockFi and Nexo, among other players. Over the past year, several regulators have clarified that they view these high-yield crypto lending products as unregistered securities offerings; As of last September, four states (New Jersey, Texas, Alabama and Kentucky) had sent cease-and-desist letters to Celsius. That month, Coinbase shut down its self-planned loan offering after the SEC threatened to sue over it.
But in February of this year, BlockFi paid $100 million to settle with the SEC and 32 states agreeing to properly register their investment products for SEC approval.
Its peers Celsius and Nexo have yet to announce similar settlements or plans.
On Sunday at 11:40 p.m. EST, Celsius and CEO Alex Mashinsky were silent on Twitter except for sharing the blog post.
This is a developing story; Check back for updates.
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