Celsius Network, a cryptocurrency lending company, is among a recent wave of crypto companies that are bolstering their legal departments with corporate law firm hires. Celsius Networks seeks to expand its financial services and has recruited Ron Deutsch as general counsel.
Built with a mission to increase access to financial services, the blockchain-based platform is fee-free. Celsius Network offers a compounding yield service. The company also offers easily accessible, low-cost loans to hundreds of thousands of customers. Users can deposit cryptocurrencies like Bitcoin and Ethereum into their Celsius virtual wallet.
Mr. Deutsch was formerly a mergers and acquisitions attorney at the New York-based law firm Paul Weiss. Celsius Network has also hired a number of other in-house counsel from Paul Weiss.
“Ron brings to Celsius the perfect combination of the highest caliber legal and business skill and experience, and a passion for entrepreneurship and the crypto industry,” said the company’s CEO Alex Mashinksty. “Ron is just another example of how Celsius is adding experts from every industry who care about doing good, and then doing well, to help execute on our vision with the best in the business.”
The Company’s Origin and Growth
Mr. Mashinksty founded Celsius Network in 2018. Although originally headquartered in the U.K., the company moved its headquarters to the United States due to regulatory uncertainty. Celsius Network is currently a private company.
With more than $20 billion in deposits, Celsius has generated investor excitement. Celsius has more than 2 million community members and has processed $8.2 billion in loans. The company has over 200 employees globally, working in offices in New Jersey, London, Tel Aviv, Cyprus, and Serbia.
In November 2021, Celsius Network raised $400 million in an equity funding round. The Series B funding round was led by Caisse de Depot et Placement du Quebec, Canada’s second-largest pension fund. As a result, the crypto lending platform has a valuation of more than $3 billion.
Its low-cost lending, high-interest yield business model has propelled the company’s growth. Among its newest projects is CelsiusX, which seeks to bridge centralized finance and decentralized finance, or DeFi.
The Biden administration has indicated it intends to put out an executive order in the first half of 2022 outlining the government’s approach to regulating crypto. The directive would task certain federal agencies to assess risks and opportunities associated with cryptocurrencies, stablecoins, and non-fungible tokens.
Celsius Network Part of SEC Probe
Crypto lending firms are under scrutiny by the Securities and Exchange Commission (SEC). High-yield products offered by crypto platforms with lending services, such as Celsius Network, Voyager Digital, and Gemini Trust, are part of an SEC probe.
The SEC is focused on the high rates companies pay customers. In order to pay higher rates than a typical bank savings account, the companies lend out digital tokens to institutional investors.
Crypto lending accounts are not federally insured, unlike traditional bank accounts. This means investors can lose the principal amount they deposited.
Celsius Network has not publicly elaborated about the SEC enforcement review. “All discussions with regulators are confidential,” said Bethany Davis, a Celsius Network spokeswoman. “We always have, and will continue to, work with regulators in the U.S. and globally to operate in full compliance with the law.” New York-based companies Voyager Digital and Gemini Trust are also in ongoing dialogue with regulators.
State-Level Threats Against Celsius Network
Beyond the SEC probe at the federal level, state officials in Alabama, Kentucky, New Jersey, Texas, Washington, and Vermont have brought enforcement actions. These regulators have threatened to ban Celsius Network from doing business in their states.
Since crypto-denominated borrowing and lending uses decentralized blockchain technology, some argue that makes it more transparent and tamper-resistant. Additionally, unlike fiat-denominated lending, crypto-denominated lending is not dependent on a central bank or sovereign nation.
Is Cryptocurrency a Path to Financial Independence?
CEO Alex Mashinsky views cryptocurrency investment as a path toward financial independence, especially for younger investors. “If you are 69 and you’re retiring next year and you’re going to need this money, obviously that is not a good idea,” said Mashinsky. “But if you’re in your 20s and you’re projecting 20 or 30 years forward, then you should have a bigger allocation.”