The SEC has recently filed complaints against Celsius Network, a crypto startup, that has been attempting to make a comeback after a $50 million hack. The Securities and Exchange Commission (SEC) noted in an order dated February 16, 2021, that Celsius had violated certain sections of the Securities Act of 1933 and the Securities Exchange Act of 1934.
The SEC claims that Celsius raised money to fund its operations through sales of “CEL” tokens, which the regulator believes are securities, as defined in the 1933 Act. In addition, the regulator stated that Celsius failed to register the sales, which violated the 1933 Act and 1934 Act. The SEC is also accusing Celsius of failing to disclose certain information to prospective and actual investors, such as the risks associated with participating in the token sales and how their funds would be used.
The SEC has sought a court order that would force Celsius to return money to investors, pay a penalty, and take remedial measures to prevent violations of the federal securities laws from happening in the future.
This setback has complicated Celsius’ attempt to recover from a $50 million hack that occurred in December 2020, which caused the crypto startup to freeze all user withdrawals for over two weeks. In order to get back on track, Celsius had to secure a loan facility, which would allow users to again deposit or withdraw funds from the platform.
However, the SEC’s order has caused further delays for Celsius, as it must now address the regulator’s accusations. If Celsius is found to have violated federal law, it could face steeper penalties and further investor losses. Regardless of the outcome, the SEC’s investigation appears to be a major hurdle for the crypto startup’s path to recovery.