Crypto lender Celsius is being investigated by multiple states after transactions freeze

Two million users were unable to access their funds.

Dado Ruvic / reuters

Crypto lender Celsius Network opted to freeze customer withdrawals and other transactions on Sunday, leaving its nearly two million users unable to access their funds. Now, state security boards in Alabama, Kentucky, New Jersey, Texas and Washington have launched probes into Celsius, Reuters reports. The SEC has also been in contact with the firm. Engadget has reached out to the agency and will update if we hear back.

This isn’t the first time the crypto lender has run into trouble with state and federal officials. Multiple states ordered Celsius last year to stop selling what are known as high-yield crypto products, which many investors warn are risky because they don’t offer the same FDIC protections as banks if the institutions go under. Currently, residents in the states of New York and Washington can’t purchase assets on Celsius.

Officials at the Texas State Securities Board began discussing Celsius’s surprise freeze on consumer assets first thing on Monday morning, the agency’s enforcement director Joseph Rotunda told the Reuters. "I am very concerned that clients – including many retail investors – may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences," he said.

In its memo to users explaining Sunday's decision, Celsius cited “extreme market conditions” as the primary motivator. The freeze includes transfers, withdrawals and swaps between accounts. “We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” wrote the firm.

Users responded via social media over the weekend, often sharing the negative impacts the freeze had on their own finances. One user claimed on Twitter that, because they were unable to access funds to pay or post collateral, the platform had liquidated a loan worth more than $27,000. "This is not the reason I unbanked myself," they wrote.