Kentucky is the 4th state in the United States to file a lawsuit against Celsius, a digital asset or cryptocurrency lender. The legal step was taken by the U.S. government on the Celsius Network and has attracted the ire of securities regulators towards its products and company.
Kentucky state’s Securities Division filed the suit on Thursday. The Securities Division is an office in the Department of Financial Institutions. The division filed an order towards the startup regarding their “Earn Interest Accounts”.
Securities hiding as interest accounts
The regulator found problems with the company’s language used to explain interest acquired over certain types of crypto accounts. These are accounts that Celsius dubbed as “financing fee” or “rewards”.
According to the regulator, Celsius’s interest accounts are in violation of Kentucky securities laws. They do not disclose what happens to the deposits and if customers are given protection under Kentucky’s securities laws.
It was brought to the department’s attention that Celsius was offering securities as investment contracts in return for asset deposits within the company. With these investment contracts, investors will be able to earn profits via interests on assets put into the company. According to the department, these are masquerading as securities.
Celsius plans to hold an emergency meeting to counter the decision. The company may also appeal in court. This is yet another blow for Celsius. Kentucky is the 4th state after Texas, Alabama, and New Jersey to challenge Celsius’ practices. Last week, Alex Mashinsky, CEO of Celsius, put a pause on the crypto firm’s deadlock with Kentucky state regulators. He announced to an audience over a live stream address about how he is open to opportunities to teach regulators how his business operates.
