Former CEO of Celsius Network, Alex Mashinsky, Arrested on Securities Fraud Charges
Alex Mashinsky, the co-founder and former CEO of the now-insolvent crypto lender Celsius, was arrested on Thursday following an investigation into the company’s collapse. The U.S. Department of Justice (DOJ) indictment charged Mashinsky and others with seven counts, including securities fraud, commodities fraud, wire fraud, and conspiracy to manipulate the price of Celsius’ token CEL.
The lending platform filed for bankruptcy in July 2022, and crypto consortium Fahrenheit recently won a bid to acquire its assets. New York Attorney General Letitia James previously sued Mashinsky for allegedly misleading investors about the firm’s health leading up to its bankruptcy filing. Mashinsky denied the accusations, calling them “baseless” and influenced by online misinformation.
The DOJ accused Mashinsky and the firm’s Chief Revenue Officer, Roni Cohen-Pavon, of orchestrating a scheme to mislead customers about the market value of the company’s assets and interest in CEL. The indictment stated that Mashinsky made false and misleading public statements about his sales of CEL. Cohen-Pavon was also arrested on Thursday.
The Securities and Exchange Commission (SEC) filed a lawsuit on the same day, accusing Celsius and Mashinsky of securities fraud. The SEC claimed that CEL and Celsius’ Earn Interest Program constituted securities and that the company failed to register with the SEC for their offers and sales of securities.
In a separate complaint, the Commodity Futures Trading Commission (CFTC) accused Celsius and Mashinsky of defrauding customers by misrepresenting the safety and profitability of its digital asset-based finance platform. The FTC also charged former executives with tricking consumers into transferring crypto onto the platform.
The FTC announced a settlement with Celsius Network that will permanently ban it from handling consumers’ assets and offering certain products or services. The companies agreed to a judgment of $4.7 billion, which will be suspended to allow Celsius to return its remaining assets to consumers in bankruptcy proceedings.
Lawyers for Mashinsky, Celsius, and the SEC did not immediately respond to requests for comment. The ongoing legal proceedings highlight the challenges and risks associated with the crypto industry and the importance of regulatory oversight.
