Idahoans stand to lose nearly $60 million on investments in this crypto company
The Idaho Department of Finance is going after a cryptocurrency company accused of holding nearly $60 million in investments from more than 1,300 Idaho residents and businesses.
Celsius, one of the largest crypto-based finance platforms, froze all customer withdrawals in June after advertising investors could withdraw their assets at any time, according to a news release from the department. The company filed for Chapter 11 bankruptcy protection in July.
On its website, the crypto lender promises rates of return as high as 17%.
Department of Finance Supervisory Examiner Robert Moore told the Idaho Statesman via phone that Celsius is a newer company operating without the government safeguards provided to traditional banks.
“We started investigating and found they did not have any licenses to engage in this activity in Idaho,” Moore said. “We’re trying to provide consumer protection and make sure the companies acting in this space are doing so in good faith.”
The agency issued a notice in August of its intent to order the company to cease and desist from violating financial regulations in the state.
It said Celsius violated the Idaho Trust Institutions Act, Idaho Uniform Securities Act and Idaho Money Transmitters Act. In response to the notice, the company requested a hearing on the allegations.
When cryptocurrency first began around 2009, Moore said, the idea was to decentralize the financial system.
“They wanted to go after the banks and take out the middleman,” Moore said. “If you wanted to lend, you could do it peer to peer and not have to rely on the banking system.”
But now, Moore said his agency is seeing more and more crypto companies engage in the same financial activities that a traditional bank would, like accepting funds on deposit or providing loans.
The department aims to regulate the activity, not necessarily the asset.
“We’re seeing a lot of these companies that are operating very, very similar to a bank,” Moore said. “And that is concerning to us. Banks are operating in a highly regulated environment, and they’re required to have safeguards and consumer protection policies in place to make sure this exact thing doesn’t happen.”
For example, bank deposits are insured by the Federal Deposit Insurance Corporation for up to $250,000. Investors in cryptocurrency don’t have that kind of protection.
It’s unclear when or if Celsius customers in Idaho, and across the country, will get access to their deposits.
Travis Woodbury, securities investigations supervisor for the department, said Celsius hasn’t met its deadline to provide account information on the company’s customers in Idaho.
“They’ve been hammered with a lot of different regulators asking for a lot of information,” Woodbury said. “So that information is not coming out as fast as we would hope.”
This story was originally published September 5, 2022 at 4:00 AM.
