Crypto companies not governed by same protections as banks, credit unions



commerce department


Consumer Alert




*Contact:*?Brett Benson?

[email protected]




Nov. 28, 2022

?




________________________________________________________________________

*After crypto bankruptcies, Commerce urges caution before investing in crypto-interest accounts*

After the bankruptcy filing this month by the giant cryptocurrency exchange FTX, the Minnesota Department of Commerce is issuing a Consumer Alert cautioning potential investors that companies offering interest-bearing crypto accounts are not governed by the same rules and protections as banks and credit unions.

FTX?s collapse unfolded over a matter of days and jolted the crypto market. It follows bankruptcy filings in July by two other large cryptocurrency companies, Celsius Network and Voyager Digital. All three moves have contributed to growing concerns at the state and federal level over a rapidly evolving segment known as decentralized finance, which includes cryptocurrency products and services, and which has been particularly volatile this year.

Many of the products and services offered by cryptocurrency companies are similar to traditional financial services offered by banks and brokerages, but without any of the regulatory safeguards provided by registered firms and products.

News outlets have reported that $1 billion in client funds invested through FTX appear to be missing and that hackers may have stolen $370 million. Celsius and Voyager both froze transactions in the days before their bankruptcy filings, leaving many customers unable to access their accounts. Celsius reported it had more than 1 million customers and was managing more than $20 billion in assets. Voyager reported 3.5 million customers and $5.8 billion under management. FTX was recently valued at $32 billion.

Companies that have promised high returns in what are commonly called crypto-interest accounts have slowed or halted transactions in those accounts, creating uncertainty among customers. *Minnesota investors with questions or concerns about their own investment accounts, for any reason, can contact Commerce at **[email protected]* <[email protected]>* or call 651-539-1637*. They also have the option to file a complaint using our online form at mn.gov/commerce/consumers/file-a-complaint/ [ [link removed] ].

The Department of Commerce regulates firms that sell securities in Minnesota as well as the securities themselves. FTX was founded in the Bahamas but has a U.S. arm that?s registered as a broker dealer in Minnesota. Celsius and Voyager were not registered in the state.

?Requiring crypto firms and other securities dealers to register helps to ensure that investors receive all of the information they need to make decisions,? said Max Zappia, Deputy Commissioner for Financial Institutions. ?That includes information about the risks that companies may be taking when customers hand over control of their crypto assets to these platforms.

?We will continue to investigate whether other crypto-interest account providers are offering securities that legally should be registered or violating other laws under our jurisdiction. At the same time, we strongly advise Minnesotans who are considering investing in crypto to consider their tolerance for risk and to be aware of the potential for financial losses.?

Crypto-interest account providers are not required to have deposit insurance, as banks and credit unions are ? another reason Commerce encourages consumers to exercise caution before responding to solicitations for investment or financial services.

Commerce is part of a multistate task force that researches the risks faced by consumers who invest in cryptocurrency and inspects cryptocurrency business models and their applicability to the laws Commerce is charged with enforcing. In February 2022, Minnesota and 31 other states, along with the U.S. Securities and Exchange Commission, reached a settlement with another New Jersey crypto company, BlockFi, for offering accounts that met the legal definition for securities but were not registered as securities. Under the settlement, BlockFi has begun paying the state of Minnesota $940,000 in installments. But in the wake of FTX?s collapse, news outlets reported today that BlockFi also has filed for bankruptcy.

________________________________________________________________________

*RESOURCES* [ [link removed] ]


* Commerce investigates complaints about crypto firms and other financial service professionals and providers. Visit *gov/commerce/consumers/file-a-complaint/#complaint* to file a complaint. Please include copies of account statements or other transaction documentation; any correspondence; and screen shots of any records relating to tokens or relevant blockchains, if possible.
* Public filings in the Celsius and Voyager bankruptcy cases are available at cases.stretto.com/voyager [ [link removed] ] and cases.stretto.com/celsius [ [link removed] ].?
________________________________________________________________________

Get updates and news from the Minnesota Department of Commerce by following Commerce on?Facebook [ [link removed] ]?and?Twitter [ [link removed] ]?or by subscribing to our?news email list [ [link removed] ]?or learn more at?mn.gov/commerce. [ [link removed] ]






*Minnesota Department of Commerce*
85 7th Place East, Suite 280
St. Paul, MN 55101

Update your subscriptions, modify your password or email address, or stop subscriptions at any time on your Subscriber Preferences Page [ [link removed] ]. You will need to use your email address to log in. If you have questions or problems with the subscription service, please contact subscriberhelp.govdelivery.com [ [link removed] ].

________________________________________________________________________

This email was sent to [email protected] using GovDelivery Communications Cloud on behalf of: Minnesota Department of Commerce GovDelivery logo [ [link removed] ]