Table of Contents
- SEC, CFTC, and FTC File Lawsuits Against Mashinsky
- DOJ: Mashinsky Misled Investors for Years
- CFTC Alleges a Fraud Scheme
- SEC Accuses Celsius and Mashinsky of Securities Fraud
- FTC Announces $4.7 Billion Settlement With Celsius
Celsius co-founder and former CEO Alex Mashinsky was arrested on Thursday after an investigation into the bankrupt lender’s collapse.
Alex Mashinsky, co-founder and former CEO of the insolvent cryptocurrency lender Celsius Network was arrested on Thursday according to a US Department of Justice (DOJ) indictment.
Mashinsky and others have been charged with seven counts, including securities, commodities, and wire fraud, and a conspiracy charge to manipulate $CEL, Celsius’ native token, Bloomberg reports.
SEC, CFTC, and FTC File Lawsuits Against Mashinsky
The DOJ’s indictment is accompanied by separate lawsuits by the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC) against the company and Mashinsky.
DOJ: Mashinsky Misled Investors for Years
The Department of Justice accused Mashinsky and Celsius’ Chief Revenue Officer Roni Cohen-Pavon of running “a years-long scheme to mislead customers” on Celsius’ market value and its interest in CEL.
Bloomberg reports the DOJ indictment further accused Mashinsky of making false and misleading public statements regarding his own sales of CEL.
The DOJ indictment reads:
Mashinsky portrayed Celsius as a modern-day bank, where customers could safely deposit crypto assets and earn interest. In truth, however, Mashinsky operated Celsius as a risky investment fund, taking in customer money under false and misleading pretences.
CFTC Alleges a Fraud Scheme
The Commodity Futures Trading Commission (CFTC) accused Mashinsky and Celsius of participating in a “scheme to defraud hundreds of thousands of customers by misrepresenting the safety and profitability of its digital asset-based finance platform.” The complaint adds despite worsening market conditions, Celsius continued to “promote the safety and viability of Celsius, and failed to disclose these losses to customers.”
The regulator further alleges Celsius violated several federal commodities regulations, failed to register as a Commodity Pool Operator, engaged in fraud, and did not provide sufficient disclosure documents.
Investigators from the CFTC previously concluded that Mashinsky and Celsius violated several US laws.
SEC Accuses Celsius and Mashinsky of Securities Fraud
In a separate lawsuit, the Securities and Exchange Commission accused Mashinsky and the firm of securities fraud. According to the SEC, CEL and Celsius’ Earn product are securities.
The SEC’s complaint alleges:
In this case, Celsius offered and sold CEL and the Earn Interest Program as securities. Celsius and Mashinsky never filed a registration statement or had one in effect with the SEC for their offers and sales of securities through the Earn Interest Program.
FTC Announces $4.7 Billion Settlement With Celsius
The barrage of claims against Celsius and its former CEO further included a Federal Trade Commission (FTC) complaint.
The FTC said Celsius violated the Federal Trade Commission Act “in connection with the marketing and sale of cryptocurrency lending and custody services.”
The commission said:
Defendants assured customers that Celsius maintained sufficient reserves to meet customer obligations.
However, the FTC reached a settlement agreement with Celsius “that will permanently ban it from handling customers’ assets” and prohibits it from “offering, marketing, or promoting any product or services that could be used to deposit, exchange, invest or withdraw any assets.”
Celsius has agreed to a $4.7 billion judgement which will only be paid after creditors and investors have been repaid in bankruptcy proceedings.
Samuel Levine, Director of the FTC’s Bureau of Customer Protection, commented on Celsius's alleged conduct, saying:
Celsius touted a new business model but engaged in an old-fashioned swindle.
Today’s action banning Celsius from handling people’s money and holding its executives accountable should make clear that emerging technologies are not above the law.
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