Alex Mashinsky, CEO of Celsius Network, accused of fraud
Celsius founder Alex Mashinsky is facing a growing list of issues, as he has been taken into custody and accused of fraudulent activities by federal authorities. According to CBS News, Mashinsky is confronting seven criminal charges, encompassing securities, commodities, and wire fraud. Additionally, his company is currently facing legal action from three government agencies, namely the FTC, CFTC, and SEC. The U.S. Attorney’s Office claims that Mashinsky deceived customers by misrepresenting his company as a bank, when in reality, it operated as a high-risk investment fund.
Roni Cohen-Pavon, the former head of Celsius, was also arrested, and both Pavon and Mashinsky were accused of manipulating the price of the company’s crypto token so they could sell their own shares at a high price.
“Mashinsky misrepresented, among other things, the safety of Celsius’ revenue-generating operations, the profitability of Celsius, the long-term sustainability of Celsius’ high fees, and the risks associated with depositing crypto assets with Celsius,” federal prosecutors wrote in the indictment. Document obtained by CNBC.
In addition, the FTC today reached a $4.7 billion settlement with Celsius, nearly matching the fines imposed on Meta in 2019 for violating consumer privacy. The company has accepted these financial terms, but will not make payments until it returns the customer’s funds as part of the ongoing bankruptcy proceedings.
This all followed a lawsuit launched in New York in January, which also alleged massive fraud. The suit seeks appropriate damages after Celsius allegedly defrauded investors out of “billions of dollars” in cryptocurrencies.
While there are few details about today’s arrest, the New York suit alleges that Mashinsky misled clients about the company’s deteriorating financial condition and failed to register as a commodities and securities trader, among many other allegations. New York State Attorney General Letitia James alleged that Mashinsky defrauded hundreds of thousands of investors, more than 26,000 of whom were located in New York.
If convicted of all charges, Mashinsky and Pavon face decades in prison. Mashinsky resigned from the CEO position of Celsius last year and is no longer involved in the company.
