California Department of Financial Protection and Innovation (DFPI) has ordered MyConstant to cease offering some products.
The DFPI had warned in July that it would crack down on crypto interest account providers.
DFPI argues that MyConstant offered and sold unqualified, non-exempt securities.
In a press release on December 21, the California Department of Financial Protection and Innovation (DFPI) ordered crypto lending platform MyConstant to “desist and refrain” from offering a number of its crypto-related services in California. This comes after the department warned in July that it would be cracking down on crypto interest account providers in the state.
The DFPI first announced it was investigating MyConstant on December 5 via a press release that stated that MyConstant was not licensed to operate in California.
MyConstant was specifically ordered to stop offering its peer-to-peer loan brokerage service and interest-bearing crypto asset accounts. The DFPI says that the two products violate the California Consumer Financial Protection Law and California Securities Law.
According to the DFPI, MyConstant’s offering and selling of its peer-to-peer lending service known as “Loan Matching Service” contravenes California’s financial codes. The department said that the crypto lender engaged in “unlicensed loan brokering,” since the platform allowed lenders to lend without proper licenses.
DFPI’s problem with MyConstant interest-bearing products
Besides the P2P lending, the DFPI also has problems with MyConstant’s fixed interest-bearing crypto asset product. The product allows customers to deposit crypto assets and fiat with the promise of receiving a fixed annual percentage interest return.
According to the DFPI, the product is an example of where MyConstant offered and sold unqualified, non-exempt securities.
MyConstant has been facing hard economic times
The action by DFPI comes at a time when the crypto lender seems to be going through tough times. On November 17, it announced that it was unable to continue with business as usual due to the rapidly deteriorating market conditions that prompted heavy withdrawals.
The platform then limited its business activities including pausing withdrawals and announcing that “No deposit or investment request will be processed at this time.”
Since then MyConstant has been updating its users on its website on future plans including recently (December 15) updated plans that include a financial overview, estimated recovery, and liquidation schedule.
The platform has however continued to offer crypto-backed loans, ensuring borrower compliance, processing loan repayments, returning borrowers’ collateral once they repay their loans in full, and liquidation of borrowers’ collateral if they default.
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