Crypto firms Celsius, Voyager, Gemini face SEC scrutiny

The U.S. Securities and Exchange Commission (SEC) is scrutinizing cryptocurrency firms Celsius Network, Voyager Digital Ltd. and Gemini Trust Co., according to people familiar with the matter, as part of a broader probe into companies offering interest-bearing products on virtual token deposits .

The SEC enforcement review focuses on whether the products offered by the companies should be registered as securities with the regulator, the people said, who were not authorized to speak publicly. These companies are able to pay customers higher interest rates than most bank savings accounts by lending their deposited digital currencies to other investors. The SEC and several states, including New Jersey and Texas, said the practice raised concerns about investor protections.

The surveys have added to uncertainty in the nascent industry of cryptocurrencies, which is experiencing a slump — bitcoin tumbled 50% from its all-time high earlier this month — at a time when countries around the world are increasingly Keep an eye on crypto regulation. Another crypto lender, BlockFi Inc., is also facing scrutiny from the SEC, Bloomberg reported last year, with Celsius and BlockFi both the targets of earlier enforcement actions by state securities regulators. The review is still ongoing, and the companies have challenged the allegations.

“We are one of many companies approached by the SEC regarding crypto-revenue products,” Gemini spokeswoman Carolyn Vadino said in a statement. “We are actively cooperating with this industry-wide investigation.”

“All discussions with regulators are confidential,” said Celsius spokesman Bethany Davis. “We have been working with regulators in the U.S. and around the world in full compliance with the law and will remain so in the future.”

Voyager spokesman Mike Legg said the regulatory environment is rapidly evolving and that “financial services firms, whether related to digital assets or otherwise, have ongoing dialogue with regulators as normal.”

The SEC has not accused Gemini, Celsius or Voyager of any wrongdoing, and not all inquiries from regulators result in enforcement action. An SEC spokesman declined to comment.

Crypto lenders say they have collected more than $40 billion in deposits. These accounts look a lot like traditional banking, where businesses accept deposits and pay interest. The difference is that many of these companies offer deposit rates for tokens ranging from 3% to 18%, paid in digital tokens, while bank savings accounts have an average yield of 0.06%. Unlike bank deposits, crypto accounts are not federally insured, meaning investors could lose their principal.

These companies typically say they make money by lending cryptocurrencies at higher rates to institutional investors who need the tokens to execute their own transactions. But because the companies did not register their products with authorities, regulators said they were concerned that potential risks would not be disclosed to investors.

Celsius, which has $18.1 billion in deposits, was incorporated in the U.K. in 2018, but the company said last year it would move its headquarters to the U.S. due to regulatory uncertainty. In October last year, Celsius completed a $400 million equity financing, led by WestCap and Caisse de dépôt et placement du Québec (CDPQ), with a post-money valuation of more than $3 billion. WestCap is a fund founded by former Airbnb and Blackstone executive Laurence Tosi; CDPQ is Canada’s second-largest pension fund.

Cryptocurrency exchange Gemini was founded in 2015 by brothers Cameron and Tyler Winklevoss. The company’s “Gemini Earn” crypto account pays up to 8.05 percent interest, and the company said it earned the benefit from working with third-party borrowers and reviewed its risks.

New York-based Voyager, which also operates an exchange, had $7 billion in assets under management as of November. The company, which is listed on the Toronto Stock Exchange, had a market value of about C$1.7 billion ($1.35 billion) as of noon Wednesday.

Coinbase then shelved the plan after the SEC sent a letter to Coinbase Global Inc. last year warning the company would be sued if it went ahead with its lending product. SEC Chairman Gary Gensler has repeatedly said he believes many cryptocurrency companies are selling products that should be registered with the agency, and urged companies to discuss with the SEC how to regulate such products.

State officials, including those in New Jersey, Texas, Alabama, Vermont, Kentucky, and Washington, have taken several enforcement actions against Celsius, BlockFi, and threatened to ban them from business . Regulators in some of those states are now considering similar action against Voyager, according to people familiar with the matter. In response, Voyager’s Legg said it was normal for the company to have ongoing dialogue with regulators.

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