Texas and Alabama officials are investigating the collapse of crypto-lending companies, Voyager Digital and Celsius Network.,
according to a bloomberg In the report, an investigation by state regulators is set out to understand whether crypto lending firms withheld information about their loans and how they determined creditworthiness.
Joe Rotunda, enforcement director at the Texas Securities Board, said crypto lending firms may not have disclosed the risks associated with those lending practices.
According to the Rotunda:
What we’re seeing now is that a lot of these crypto-lending firms haven’t fully disclosed what they were doing with investors’ money, the risks associated with those types of lending practices, or even other types of transactions they are engaged in.
Judge gets a crash course in crypto
Judge Michael Wills, who is presiding over Voyager’s bankruptcy hearing, got a digital asset crash course during the first ever bankruptcy hearing for a digital asset company.
Lawyers representing Voyager taught judge crypto concepts such as staking and stablecoins.
Josh Sasberg, Christopher Marcus and Christine O’Keeke of Kirkland & Ellis represented Voyager.
Lawyers with Judge Wills acknowledged that there are many questions about how to handle the bankruptcy filing, especially because it’s a first for digital assets.
Voyager’s lawyer also acknowledged that the digital asset sector is new to many of them and that there will be some legal issues along the way.
The judge nonetheless asked how Voyager deals with its account holders; If it acts as a custodian of customers’ funds, or if customers are like bank depositors. His question pertains to the approximately $350 million in funds from customers at Metropolitan Commercial Bank.
Responding to the judge, Sasberg insisted that the money remained with the customers and would certainly go to them. He said this would be done after the company has put in place proper fraud prevention process.
Meanwhile, Voyager’s lawyers claim the plan could change if the company can find buyers to acquire the business.
Voyager’s lawyers also acknowledged that the firm is facing threats from users and government officials who are trying to hold them accountable for the issues.