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Crypto: What You Should Know Right Now

Over a matter of days, the crypto platform FTX went from being one of the largest cryptocurrency exchanges worldwide to filing for bankruptcy.

The DFPI has opened multiple investigations in connection with crypto companies. Since last week, the DFPI has announced investigations into FTX, BlockFi and Salt Lending LLC. Additionally, the DFPI also took enforcement actions against companies that offer crypto interest accounts, including Voyager Digital LLC, Celsius Network LLC, and Nexo Group.

Consumer Questions from Social Media

In addition to protecting consumers from harm, the DFPI is committed to being a resource for accurate information for consumers and investors on financial topics.

The department regularly monitors the most pressing questions that rise to the surface on social media. Below are some of the top questions you’ve been sharing about the recent crypto crisis online.

Have other questions you’d like us to answer? Reach out at communications@dfpi.ca.gov.

1. The exchange where I hold my crypto is no longer allowing withdrawals. What can I do?

Focus on what you can do. Contact an attorney to find out what legal recourse you have.  Account for your assets by gathering account statements and other documentation. Find the customer agreement for your account to educate yourself on any recourse you have with the company you have done business with. And most importantly, do not respond to appeals for personal information or advice from third parties you did not initiate.

Scammers are opportunists and exploit consumer anxiety. People should be especially cautious about offers of “help” or “tools” to provide access otherwise denied. Do not respond to appeals for personal information from contacts you did not initiate.  

2. Will I get my crypto or my money back if an exchange files for bankruptcy?

It all depends on your individual circumstances. Contact an attorney to find out what legal recourse you have.  However, you should be aware that bankruptcy processes typically take a long time. For people who have dollars or other fiat currency held by exchanges, those funds are not covered by deposit insurance as funds are when held at a traditional financial institution, like a bank.

Learn more from a recent the FDIC fact sheet on its insurance and crypto companies.

If your crypto exchange goes out of business, no government agency can restore your losses. Your outcome may depend on the bankruptcy process, which may or may not happen in a U.S. court under American bankruptcy rules.

3. How can I get help?

Contact an attorney to determine what legal recourse you may have.  If you don’t know where to start, you can contact your local courthouse, bar association, or legal aid organization to get a referral. 

If you feel you have been tricked into sending money to a company or individual, you should file a complaint with DFPI at dfpi.ca.gov/file-a-complaint or by calling toll-free at (866) 275-2677. Common scams include romance scams and high yield investment programs. DFPI cannot force a company to return your money, but it will review complaints for possible enforcement action. Additionally, you may wish to file a complaint with law enforcement, including the California Attorney General, the Federal Bureau of Investigations, your local district attorney and police department.

4. I have a loan with crypto as collateral and the lender has suspended withdrawals. What can I do?

  • Contact your lender and your lender’s servicer (if applicable) to ask for new instructions given recent events. We suggest that you contact both by phone and by email.

    Some questions you may want to ask are:

    • Please send me my current loan balance and a transaction log.
    • What is the status of my loan collateral?
    • What is the status of my loan?
    • Can I cancel my autopay?
    • Are you still requiring me to make my regular payment?
    • If I were to pay my loan in full today, what would happen? Would you return all of my loan’s collateral?
  • File a complaint at ca.gov/file-a-complaint or call toll-free at (866) 275-2677.
  • Report your complaint to federal agencies:
  • Consumer Financial Protection Bureau: ` https://www.consumerfinance.gov/complaint/
  • Federal Trade Commission: ftc.gov
  • Contact an attorney who can advise you on your options.

5. What companies are DFPI investigating?

Since last week, the DFPI has announced investigations into FTX, BlockFi and Salt Lending LLC.  The DFPI also took action against Celsius, Voyager, and Nexo.

A current list of actions and orders issued against individuals and firms under one or more laws within the jurisdiction of the can always be found on our website.

6. What are some of the risks of crypto assets?

First, it’s important to note that no investment is free of risk. However, the values of all crypto assets have been extremely volatile. As with any volatile asset class, consumers shouldn’t invest money that they aren’t comfortable losing.

It’s also important to remember that investments in crypto assets aren’t likely to have the same government protections as money in banks, and payments made by crypto assets don’t have the same protections as payments made with debit or credit cards.

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Last updated: Sep 11, 2023 @ 10:26 am