California’s Department of Financial Protection and Innovation (DFPI) has announced the suspension of SALT Lending’s license to carry out any financial activity in the state for a month.
The public disclosure comes on the heels of Salt’s decision to pause the withdrawals of customers’ deposits. SALT, a digital asset lender, blamed the recent FTX collapse for its financial turmoil but noted that it is working with relevant stakeholders to resolve the debacle.
“I am sorry to report that the collapse of FTX has impacted our business. Until we are able to determine the extent of this impact with specific details that we feel confident are factually accurate, we have paused deposits and withdrawals on the SALT platform effective immediately,” SALT CEO Shawn Owen said.
Things went from bad to worse as California’s DFPI slammed the firm with a three-day notice to suspend its license for 30 days. The DFPI is also “investigating SALT’s compliance with the laws within the Commissioner’s jurisdiction, including California Financing Law.”
The DFPI has launched similar investigations against firms that have decided to pause deposits and withdrawals for customers, with BlockFi being the most recent. The regulator is also independently probing FTX over the circumstances that led to the collapse of the exchange, specifically the reports of financial impropriety by its CEO, Sam Bankman-Fried.
This is not the first time SALT had a run-in with the regulators, having clashed with the U.S. Securities and Exchange Commission (SEC) in 2020. The SEC charged the firm for selling unregistered securities in its initial coin offering (ICO) back in 2017.
Given the exposure of SALT to FTX, a non-binding letter of intent of Bnk To The Future to buy the company has fallen through “for failing due diligence.”
California hardening its stance on the digital assets industry
California has traditionally adopted a lax outlook toward virtual currencies, making it one of the most preferred destinations for service providers. However, the unsavory reports from the ecosystem are pushing the state’s regulators to consider their stance toward the industry.
Recently, the state’s Attorney General Rob Bonta issued a warning to residents to exercise caution in investing in virtual currencies, given the ‘risky’ nature of the asset class. He drew attention to scams like rug pulls, pig butchering, and the use of celebrities to lure in investors as part of the challenges plaguing the industry.
California’s legislature wants the state to create a digital asset law that would serve as a framework for all participants, but their attempt has run into the stumbling block of Governor Gavin Newsom’s veto powers.
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