Celsius Network Founder Alex Mashinsky Arrested and Charged with Fraud and Market Manipulation
In a significant turn of events, Alex Mashinsky, the founder of Celsius Network Ltd, a bankrupt cryptocurrency lending platform, has been arrested and charged by US authorities with fraud and market manipulation. Mashinsky allegedly deceived investors into depositing billions of dollars into Celsius by presenting it as a modern bank where customers could securely store their crypto assets and earn interest.
However, according to the prosecution's indictment released shortly after Mashinsky's arrest on Thursday, the cryptocurrency platform operated as a risky investment fund that was far less profitable than what Celsius led investors to believe. The indictment also revealed that Celsius used some customers' funds to manipulate the market for a cryptocurrency token called CEL. By doing so, Celsius was able to sell its own CEL holdings at prices higher than their market value.
Roni Cohen-Pavon, the former Chief Revenue Officer of Celsius, was also charged by the prosecutors. Three US regulatory agencies filed parallel civil lawsuits on Thursday. The Securities and Exchange Commission (SEC) aims to impose fines on Mashinsky and ban him from the cryptocurrency industry, while the Commodity Futures Trading Commission and the Federal Trade Commission are also seeking monetary penalties.
Neither Celsius nor Mashinsky's lawyer immediately responded to requests for comments. Celsius filed for bankruptcy last July after experiencing a collapse in the cryptocurrency market in 2022, as popular tokens like Bitcoin and Ethereum lost more than half of their value. In the preceding month, Celsius had excluded hundreds of thousands of investors from accessing their funds due to a surge in withdrawal requests.
Mashinsky was previously sued by New York Attorney General Letitia James in January for alleged "fraudulent activities involving hundreds of thousands of investors" with cryptocurrencies worth billions of dollars. He has denied any wrongdoing. His lawyers argued in May that James' claims were based on "baseless conclusions" and that Celsius' ultimate downfall was caused by a series of catastrophic external events.
However, the SEC's lawsuit filed on Thursday accuses Celsius of engaging in "risky trading practices" and granting unsecured loans to generate revenue, exposing the entire Celsius enterprise to significant risk. The SEC added that Celsius frequently used over 80% of its revenue to fulfill interest payment obligations, a business practice that was concealed from investors. Furthermore, the SEC claimed that Celsius and Mashinsky falsely stated that the platform had one million active users, while their internal data showed that only around 500,000 users had deposited crypto assets with Celsius.
The arrest and charges against Mashinsky mark a significant development in the case against Celsius Network Ltd and highlight the growing regulatory scrutiny of the cryptocurrency industry. Investors, industry experts, and regulators are closely watching this case, hoping for clarity and accountability in the rapidly evolving cryptocurrency market.
Referenz: Financial Times
