- Alex Mashinsky, former CEO of Celsius, was arrested on charges of federal securities fraud, following the crypto exchange’s bankruptcy and a $4.7 billion settlement with the FTC.
- Mashinsky and co-defendant Roni Cohen-Pavon face potential decades in prison if convicted of securities, commodities, and wire fraud, among other charges.
- The SEC alleged that Celsius and Mashinsky fraudulently manipulated the price of the Celsius exchange token, CEL, and misled investors about the company’s business model and its defaults on institutional loans.
The crypto world was sent reeling yesterday as news broke that Alex Mashinsky, former CEO of Celsius, was arrested on federal securities fraud charges.
This followed a record-breaking $4.7 billion settlement agreement with the Federal Trade Commission (FTC) by the now bankrupt crypto exchange.
Mashinsky and Celsius are at the heart of a storm involving multiple federal agencies, having also been sued by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
They face allegations of masterminding a scheme that defrauded investors out of billions of dollars.
Despite the charges of securities, commodities, and wire fraud brought against him in Manhattan federal court, Mashinsky has entered a plea of not guilty.
The charges, which also include various forms of securities manipulation and fraud, could see Mashinsky and co-defendant, Roni Cohen-Pavon, spending decades behind bars if convicted.
The FTC’s settlement with Celsius is one of the largest in its history, only narrowly behind the record $5 billion fine against Meta in 2019.
The agency expressed that this is a clear representation of Celsius and Mashinsky’s continuous deceptive practices.
However, payment will be deferred until the company can recuperate customer assets through bankruptcy proceedings.
“Mashinsky misrepresented, among other things, the safety of Celsius’s yield-generating activities, Celsius’s profitability, the long-term sustainability of Celsius’ high rewards rates, and the risks associated with depositing crypto assets with Celsius,” U.S. Attorney Damian Williams’s office said in a charging document.
Simultaneously, the SEC proceedings allege fraudulent manipulation of the price of Celsius’ exchange token, CEL, and misleading investors.
The SEC also contested Celsius’s claims about its business model, asserting that they had allegedly experienced “hundreds of millions of dollars” in defaults on institutional loans.
Jonathan Ohring, Mashinsky’s counsel, stated in response to these charges: “Alex vehemently denies the allegations brought today. He looks forward to vigorously defending himself in court against these baseless charges.”
These revelations come just months after Mashinsky was accused of a staggering $20 billion fraud against investors by New York prosecutors.
The unfolding drama serves as a stark reminder of the risks inherent in the turbulent world of cryptocurrency.