Idaho Dept. of Finance takes action against Celsius Network

The State of Idaho is taking action against a bankrupt cryptocurrency firm it says has nearly $60 million in funds from Idahoans that are locked away.

Celsuis, a prominent crypto lender, faces charges of fraud and that it was an illegal ponzi scheme. It filed for bankruptcy protection last month.

In June, as the overall cryptocurrency market saw steep declines, Celsius froze all withdrawals. The company claimed $11.8 billion in assets at the time.

The New Jersey-based company asked people to deposit cryptocurrency with it, offering a return of as much as 19% on the investment. It would then lend out the crypto to others to earn a return. The model is much the same as a bank – which takes in money in savings accounts and gives out funds in the form of loans. But there are key differences: Most banks don’t offer a 19% return, secure their investments, hold deposit insurance and aren’t based on the still-relatively new field of crypto coins.

Notice of intent

The Idaho Department of Finance issued a “notice of intent” to the company to “cease and desist from violating Idaho financial regulations,” the agency said in a news release. DFA says Celsuis is violating the Idaho Trust Institutions Act, the Idaho Uniform Securities Act and the Idaho Money Transmitters Act.

“As alleged in the Notice, Celsius marketed Earn Rewards to both retail and institutional passive investors (regardless of sophistication or wealth) and promised a significant rate of return. As further alleged, the investors’ digital assets were at risk in the business and pooled with all business assets, including other investor assets, to be used for many aspects of Celsius’ business. The Department’s Notice alleges that the Earn Rewards accounts are securities… but were not registered as securities with the Securities Bureau of the Department…”

DFA says Celsius had $59,000,000 in crypto invested in its Earn Rewards program from more than 1,300 Idahoans.

Nationwide, CNBC reports that 1.7 million Celsius customers are affected and that it owes its users $4.7 billion according to its bankruptcy filing.

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