The financial regulator of the state of Arizona alerted investors about crypto interest-bearing profiles. The financial regulator said some entities might overstate the degree to which their collateral procedures protect their ability to pay investors the stated return.

The Arizona Corporation Commission released a warning for investors this week. The entity openly spoke about digital asset financial services companies that bring interest-bearing crypto-asset accounts.

The regulator explained that, with crypto-interest accounts, customers lend cryptocurrencies to the entity, and in exchange, they receive interest paid in digital assets.

The Arizona Corporation Commission elaborated that due to the crypto market downturn caused by the recent bankruptcy filings of Celsius Network and Voyager Digital, some entities are suggesting account holders not withdraw or carry out transfers between their profiles.

The securities regulator warned investors and said that some crypto-interest account providers could not adequately disclose the risks behind making deposits of digital assets onto these networks. The regulator added that some entities might overstate the degree to which their collateral procedures cover their ability to pay investors their returns.

The commission recently took action against Blockfi Lending LLC and found that many crypto-interest profiles were just unregistered securities.

The regulator also expressed that it is investigating whether other crypto-interest account providers are breaking laws and policies under its jurisdiction.

This month, crypto lenders Celsius Network and Voyager Digital opted for bankruptcy protection. The Department of Financial Regulation based in Vermont expressed that it thinks Celsius is profoundly insolvent and lacks the currencies and liquidity to comply with its duties to account holders and other investors.

Voyager CEO Stephen Ehrlich explained why his entity decided to opt for bankruptcy status. He said the prolonged volatility in the markets over the past few months and the default of Three Arrows Capital (‘3AC’) pushed the company to take deliberate and decisive action.

In addition, the company previously said it wanted to seek recognition for the Chapter 11 case of Voyager in the Ontario Superior Court of Justice.

A case filed under Chapter 11 of the United States Bankruptcy Code gets frequently described as a reorganization bankruptcy. This type of bankruptcy freezes all civil litigation matters, allowing entities to make more efforts to plan a more solid strategy to return to their normal status while remaining active.

In its filing, New Jersey-based Voyager highlighted that it counts on more than 100,000 creditors. Alameda Research was the most prominent single creditor, with unsecured loans of about $75 million. In addition, Voyager expressed that it has between $1 billion and $10 billion in currencies and liabilities worth the same value.

Voyager went through a difficult moment and suffered huge losses due to its exposure to Singapore-based crypto hedge fund Three Arrows Capital.

Voyager froze all trading, deposits, and withdrawals on its network due to the hostile market conditions. Many other firms tied to crypto have similarly suspended withdrawals, including Celsius Network, Babel Finance, and Vauld.

By: Jenson Nuñez


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