Celsius founder and revenue officer arrested on fraud charges

abdelaziz Fathi

Alex Mashinsky, co-founder and former CEO of insolvent crypto lender Celsius, was arrested on Thursday on charges of securities fraud, commodities fraud, wire fraud, and conspiracy to manipulate the price of Celsius’ token CEL.

The arrest comes after a months-long investigation by the US Department of Justice (DOJ). The DOJ indictment was accompanied by separate lawsuits against Mashinsky and Celsius by the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC).

The SEC lawsuit alleges that Mashinsky and Celsius misled investors about the company’s financial condition and its ability to repay depositors. Additionally, they are accused of selling unregistered securities to investors in the form of crypto interest-bearing accounts (BIAs). The BIAs promised investors high returns, but the SEC said that the bankrupt lender did not have the funds to pay those returns.

In a parallel action, the CFTC filed a complaint, alleging that Mashinsky and Celsius engaged in a “scheme to defraud hundreds of thousands of customers” by mispresenting the safety and profitability of Celsius’s digital asset-based finance platform. The agency also claims that Celsius engaged in market manipulation by artificially inflating the price of CEL.

In a separate complaint, the FTC lawsuit alleges that Celsius violated consumer protection laws by making false promises to investors.

Mashinsky, who resigned as CEO in September 2022, was charged with seven criminal counts. Additionally, Celsius’ former chief revenue officer, Roni Cohen-Pavon, was accused of four criminal counts in what prosecutors described as a yearslong scheme to mislead customers.

“Mashinsky portrayed Celsius as a modern-day bank, where customers could safely deposit crypto assets and earn interest. In truth, however, Mashinsky operated Celsius asa risky investment fund, taking in customer money under false and misleading pretenses,” the indictment reads.

The lawsuit further alleges that Celsius made false and misleading statements to investors about the financial health of their business. The SEC claims that Mashinsky knew that their business was in financial trouble, but he continued to mislead investors in order to raise more money.

As crypto prices declined, he lured investors by promising that Celsius would invest it safely and pay better returns than the banks. Instead, the complaint alleges that Mashinsky used investor funds to prop up the price of CEL, Celsius’ native token.

The US regulators are seeking to hold Alex Mashinsky accountable for his alleged fraudulent, deceptive, and illegal acts. The suit asks that the court to order him to pay an unspecified number of damages, disgorge all of the assets he acquired through his misconduct, and make restitution to investors.

Read this next

Digital Assets

Binance tames up with Japan’s biggest lender to launch stablecoins

Binance Japan is planning to launch stablecoins denominated in the dollar, euro, and yen in Japan in 2024. The crypto exchange aims to introduce these tokens, and possibly more, through its partnership with Mitsubishi UFJ Financial Group’s trust banking arm.

Institutional FX

Spot FX volumes drop +10% at CLS in August 2023

Total daily traded volume submitted to CLS for settlement took a step back in August as the summer typical lull hit market activity. The metrics showed a weak performance in the group’s FX business as the Q3 got off to a calm end while no fresh events were able to whip up a market frenzy.

Digital Assets

Veteran iGaming Team Launch Crypto Casino Portal

CryptoCasinos.Casino launches as a premier destination for crypto gambling aficionados, offering in-depth reviews, comparisons, and resources to navigate the burgeoning world of cryptocurrency-based casinos seamlessly.

Digital Assets

Xsolla Announces Acquisition of AcceleratXR, A Multi-Player Platform For Games

Xsolla enhances its gaming tech suite with the acquisition of AcceleratXR, bolstering cross-platform game development and pioneering advancements in cross-play experiences for players worldwide.

Digital Assets

OKX’s PoR report shows no solvency concerns, assets worth $11.2 billion

Cryptocurrency exchange OKX has released its 11th consecutive proof-of-reserves report amid increasing demand of crypto investors asking for transparency from exchanges they trade with.

Digital Assets

Horizen Launches Decentralized Governance with Introduction of Horizen DAO

Horizen inaugurates a novel decentralized autonomous organization, inviting broader community participation and heralding a new chapter in blockchain governance.

Digital Assets

Binance France induces users to convert their fiat into crypto

Following the expiration of its partnership with Paysafe, Binance France urged its customers to convert their fiat currency holdings on the platform into cryptocurrencies.

Industry News

Exness Crowned as Best Global Multi-asset Broker at Forex Expo Dubai 2023

Cyprus-based Exness garners top honors at the Forex Expo Dubai, solidifying its esteemed position in the global financial arena.

Retail FX

CySEC cancels license of 101investing parent following €200,000 fine

The Cyprus Securities and Exchange Commission (CySEC) confirmed on Tuesday that it has wholly withdrawn the Cyprus Investment Firm (CIF) License of FX retail brokerage firm FXBFI Broker Financial Invest Ltd, trading as 101investing.