New York attorney-general bans two crypto-lending platforms

New York State Attorney General Letitia James has ordered two crypto-lending platforms to cease operations in the region. Three more firms must immediately provide information about their activities and products.

«Crypto lending platforms, in essence, are interest-bearing accounts. They offer investors a yield on the virtual currencies they custody. In New York, these platforms must register with the Office of the Attorney General (OAG) if they operate in the state or offer their products to residents», — according to the press release.

In the OAG’s published letters, company names and all data are redacted. However, in The Block they claim that initially the cease order listed Texas, New Jersey in the heading, and the information request listed Celsius Network.

The OAG cites the Martin Act, which gives the state attorney-general broad powers to investigate securities fraud.

The agency contends that the most common crypto-lending products are securities. Therefore the OAG considered the failure of the two platforms to register as broker-dealers a violation of the law.

The firms were ordered within ten days to cease any activity in the state or to explain why the OAG should not take further action, including all legally available remedies.

In the information request, the office asked the companies to provide by November 1 details on ownership structure, investment strategy and methods of storing cryptocurrency deposits.

Earlier, state regulators in Texas, New Jersey, Alabama and Kentucky accused Celsius Network of selling unregistered securities.

Similar problems in Alabama arose for BlockFi, a rival platform. The company has also faced an investigation into its Vermont operations and a ban on opening new accounts for New Jersey residents.

BlockFi CEO Zac Prince expressed confidence that the crypto-lending services will survive despite state-level regulatory pressure.