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Voyager ordered by New Jersey to ‘cease and desist’

New Jersey's move is just the latest in a series of orders and complaints against crypto-based interest-bearing account issuers in the United States.

The New Jersey Bureau of Securities has issued a cease and desist order against Voyager Digital for selling unregistered securities through its Voyager Earn program.

Voyager Digital (VGX) is a centralized, crypto-based staking, trading, and lending platform.

The order claims that each of the crypto staking and lending accounts issued through the program since 2019 are unregistered securities because of their promise of interest rates as high as 12%.

The Bureau cites as evidence for the claim messages on Voyager’s homepage encouraging users to “grow your portfolio” and “journey to the new frontier of investing.”

New Jersey claims that about 52,800 accounts and $187 million in assets are from users based in the state, out of roughly 1.5 million active accounts and $5 billion in assets on Voyager in total.

The New Jersey Bureau of Securities issued a cease and desist order to Voyager Digital.

Voyager’s marketing tactics were also criticized, with the regulators stating promotions for the program failed to disclose that Voyager’s parent company Voyager Digital LLC is a publicly traded company in Canada, not the U.S. The order claims that this “creates a misleading impression with respect to Voyager Digital, LLC's regulatory status.”

The Bureau also alleges that while Voyager claimed to be licensed, it was only licensed in some states to act as a “money services business,” which the Bureau states does not allow for the sale of unregistered securities. It added the claim “may convey the misleading impression to unsophisticated investors that Voyager is "licensed" to offer and sell such securities.”

At least five other states, Alabama, Oklahoma, Texas, Kentucky, and Vermont, have slapped Voyager with various orders, or demanded the company explain how it is not issuing unregistered securities if it wishes to stay in business in their respective states.

This incident is one in a growing list of such cases or orders against crypto companies that offer interest-bearing accounts to users. In February, crypto lending platform BlockFi was hit with a similar cease and desist order from Washington state and a $100 million penalty for selling unregistered securities in the form of its interest-bearing accounts.

Related: Class action suit against Coinbase alleges unregulated securities sales

Last September, the Securities and Exchange Commission (SEC) threatened to sue crypto exchange Coinbase if it launched its long-awaited Coinbase Lend program. This program would have resembled Blockfi and Voyager’s interest-bearing accounts for crypto lenders. At the time, Coinbase CEO Brian Armstrong called the SEC’s behavior “really sketchy,” as the threat came without any legal overtures.

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Kentucky Sends Cease and Desist Order to Crypto Lending Platform Celsius Over Interest-Bearing Accounts

Kentucky Sends Cease and Desist Order to Crypto Lending Platform Celsius Over Interest-Bearing AccountsSix days ago, the securities regulators from New Jersey and Texas cracked down on the cryptocurrency lending platform Celsius. Additionally, the Alabama Securities Commission joined in and filed a cease and desist order against Celsius. Now the state of Kentucky is following suit and has filed a cease and desist order against the crypto lending […]

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Texas and New Jersey regulators go after Celsius Network

"Companies dealing in cryptocurrencies are not immune from oversight,” said New Jersey’s acting attorney general Andrew Bruck.

The Texas State Securities Board has filed for a hearing with the potential to impose a cease and desist order against crypto lending firm Celsius Network for not offering security licensed at the state or federal level, while the New Jersey Bureau of Securities has ordered the platform to stop offering and selling interest-earning cryptocurrency products.

According to a Sept. 17 filing, the Texas regulator will be holding a hearing related to allegations thaCelsius Network is offering and selling securities in Texas that are not registered or permitted in addition to not registering as a dealer under the state’s Securities Act. Should the judge accept that the platform’s offerings represented unlicensed securities, Celsius Network may be subject to a cease and desist order.

On the same day, the New Jersey Bureau of Securities announced that it had issued a cease and desist order against Celsius for allegedly “funding its cryptocurrency lending operations and proprietary trading at least in part through the sale of unregistered securities in violation of the New Jersey Securities Law.” According to the state regulator, the platform raised roughly $14 billion from those sales.

“Financial companies operating in the cryptocurrency marketplace are on notice,” said New Jersey’s acting attorney general Andrew Bruck. “If you sell securities in New Jersey, you need to comply with New Jersey’s investor-protection laws. Companies dealing in cryptocurrencies are not immune from oversight.”

The hearing in Texas will be held either online or in-person on Feb. 14. Should the judge grant a cease and desist order, Celsius Network and its affiliates Celsius Network Limited, Celsius US Holding, and Celsius Lending would likely be required to stop offering crypto services in Texas without registering with the state’s securities board or the United States Securities and Exchange Commission.

According to the Texas filing, Celsius held more than $24 billion in digital assets as of Sept. 3, making the company one of the largest in decentralized finance. Its holdings have grown by more than 2,300% since June 2020, when it reported $1 billion in digital assets. In Texas, Celsius Network has more than $344 million in assets under management from more than 9,000 residents and local businesses as of June 9.

Texas’ Enforcement Division of the State Securities Board notified Celsius on May 14 that it may not have been in compliance with the state’s Securities Act. In a Sept. 17 filing, it alleged that the platform’s Earn Interest-Bearing Accounts were in violation of Section 4.A of the Securities Act, saying they constituted “investment contracts, notes, or evidences of indebtedness regulated as securities.”

Related: Texas regulator allows state-chartered banks to hold Bitcoin

The allegations against Celsius are similar to those both state regulators — as well as their peer in Alabama — levied against crypto lending platform BlockFi in July. The company is scheduled to appear at a virtual hearing in Texas on Oct. 13 to discuss imposing a cease and desist order for allegedly illegally funding its crypto lending operations and proprietary trading through the sale of unregistered securities. In New Jersey, the cease and desist order against BlockFi prevented the platform from onboarding new interest account clients in the state.

Cointelegraph reached out to Celsius Network, but did not receive a response at the time of publication.

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Kentucky Regulators Crack Down on Blockfi Interest-Bearing Accounts

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