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California regulators instruct MyConstant to shut down crypto lending services

California regulators instruct MyConstant to shut down crypto lending services

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California’s Department of Financial Protection and Innovation (DFPI) has ordered crypto lending platform MyConstant to stop offering a number of its crypto-related products over alleged violations of the state’s securities law.

The DFPI stated in a Dec. 21 press release that it had directed MyConstant to “desist and desist” from its peer-to-peer lending service and its interest-bearing crypto wealth accounts, which it says violates the California Securities Act and California State Consumer Financial Protection Act.

DPFI alleged that MyConstant’s offering and sale of its peer-to-peer lending service called Loan Matching Service violated one of the state’s finance laws.

It was also alleged that MyConstant was involved in “unlicensed lending brokerage” as the platform tricked lenders into lending without proper licenses.

Regulators also had a problem with the crypto lender’s fixed income crypto asset products, where a customer deposits crypto assets (such as stablecoins and fiat) and is promised a fixed annual interest rate return.

It said these were examples where MyConstant offered and sold unrestricted, non-exempt securities.

In July, the regulator said it was investigating several crypto interest account providers to determine if they were “violating laws under the department’s jurisdiction.”

DFPI first announced it was investigating MyConstant in a Dec. 5 press release, which said MyConstant was “unlicensed” by DFPI to operate in California.

Related: California regulator is investigating crypto interest accounts

The latest action comes just a month after the California-based company appeared to be hitting hard times, announcing on November 17 that “rapidly deteriorating market conditions” have led to large redemptions and that it “has been unable to to continue our business as usual.”

The platform at the time added that it had restricted its operations, including suspending withdrawals, and that: “No deposit or investment requests are being processed at this time.”

Since then, the platform has been making updates available to users on its website, including an updated plan sent to users on December 15, which includes a financial overview, liquidation plan, estimated recovery, and next steps.

At the time, the platform said it would continue to manage its crypto-backed loans, including ensuring borrower compliance, processing loan repayments, returning borrower collateral (when their loans are paid in full), and liquidating borrower collateral in the case of Original.

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