Celsius said Monday it was pausing all withdrawals in order to cause more pain in the market.
As of May, Celsius had almost $12 billion in assets under management and more than $8 billion in loans to clients. Users can get higher interest rates on their deposits.
The company said in a memo to clients that it was pausing all withdrawals, swaps and transfers due to extreme market conditions.
Concerns about Celsius' solvency have arisen from the move. Since October, when it handled $26 billion in client funds, the firm's assets have been worth less. The value of Celsius' token has been erased in less than a year. The largest holder is Celsius.
Celsius said in the memo that acting in the interests of the community was their top priority.
We have activated a clause in our terms of use that will allow for this process to take place. Celsius has valuable assets and we are trying to meet our obligations.
When contacted by CNBC, Celsius was silent.
Cryptocurrencies took a hit on the news. According to data from coin metrics, the world's biggest digital asset fell to lows not seen in more than a year. The token plunged more than 50%.
It came on the heels of the terraUSD debacle. Regulators were concerned about the high returns offered by thecryptocurrencies. terraUSD, a coin that was supposed to be worth $1, was never meant to be worth 20% of its original value.
According to market participants, Celsius had exposure to the terraUSD stable coin. Celsius denies this.
The company said last week that it had not had any problems with withdrawal requests. The company said it had enough reserves and ether to meet obligations.
Alex Mashinsky told CNBC in April that his company holds on average 300% of the loan's value as security.
He said that they had been doing this for five years. The business is doing great.
Hours before the freeze on account withdrawals was announced, Mashinsky lashed out at the investor.
Do you know anyone who has a withdrawal problem from Celsius? The investor was accused of spreading "misinformation."
There is still a regulatory gray area surrounding cryptocurrencies. Many of the products should be subject to strict rules to make sure investors are protected.
The Securities and Exchange Commission and 32 states charged BlockFi with violating securities laws. Four U.S. states sent cease anddesist letters to Celsius.
The head of international at Luno said the decision by Celsius to pause withdrawals had made the sell-off in cryptocurrencies worse.
Ayyar said that the Luna/Terra debacle may have a lot of hidden skeletons in the closet.
We are likely to see widespread regulation on yield products in the near term.
The company declined the offer from the firm to acquire its loan portfolio.
"As a sign of goodwill and in an attempt to support the digital asset ecosystem in these difficult times, yesterday we reached out to the Celsius team to offer our support, but our help was refused" said Antoni Trenchev, the CEO ofNexo.
Celsius' clients can be helped in many different ways.
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