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California Is Investigating ‘Multiple’ Crypto Lending Companies
The state’s Department of Financial Protection and Innovation is looking at whether firms that have suspended customer withdrawals and transfers have violated its laws.
Ankita K.
5:36 13th Jul, 2022

The California Department of Financial Protection and Innovation (DFPI) is investigating several U.S.-based crypto lenders after a series of prominent lenders indefinitely halted withdrawals and transfers between user accounts, released on Tuesday.

The department didn’t name the companies under investigation, but it did say it is eyeing "multiple" companies that “offer customers interest-bearing crypto asset accounts,” or crypto-interest accounts, and service providers that “may not have adequately disclosed risks customers face when they deposit crypto assets onto [lenders’] platforms.”

Over the past few months, several prominent crypto lenders have frozen withdrawals and transfers as they contend with liquidity crises spurred by a dramatic market downturn that has caused crypto prices to plunge to their lowest levels since Dec. 2020, with bitcoin tumbling below $20,000 several times in June.

In mid-June, Celsius announced it would pause all withdrawals and transfers between user accounts, citing “extreme market conditions.” Then, in July, fellow U.S.-based lender Voyager Digital announced it would temporarily pause customer trading, deposits and withdrawals, going on to file for Chapter 11 bankruptcy just days after the announcement.

The California investigation also comes on the heels of public comments from top regulators and politicians warning consumers about the risks of crypto lending.

U.S. Senator Elizabeth Warren (D-Mass.) issued an email statement in June warning crypto lending platforms’ claims of double-digit rates were often “too good to be true.”

“Too many crypto firms have been able to scam customers with too-good-to-be-true claims about safe sky-high returns, leaving ordinary investors holding the bag while insiders make off with their money,” Warren wrote.


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