Celsius founder Alex Mashinsky arrested on fraud charges

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Alex Mashinsky, the founder of bankrupt cryptocurrency lender Celsius Network, has been arrested by US authorities and charged with fraud and market manipulation.

Prosecutors allege that Mashinsky misled investors into investing billions of dollars in Celsius, portraying it as “a modern bank where customers can safely deposit crypto assets and earn interest”.

In contrast, an indictment revealed shortly after Mashinsky’s arrest said the cryptocurrency platform had acted “as a risky investment fund” that was far less profitable than Celsius, leading investors to lose money. Believed.

The criminal case, brought by federal prosecutors in Manhattan, says Celsius also used some customers’ money to manipulate the market for a cryptocurrency token called CEL. This, he said, allowed Celsius to sell its holdings of the token at prices higher than its market value.

Celsius, which is now run by a team of restructuring professionals led by former JPMorgan Chase banker Chris Ferraro, has accepted responsibility for its part in the alleged scheme, according to a non-prosecution agreement with the Justice Department.

Mashinsky was to appear in a New York court on Thursday afternoon. Ronnie Cohen-Pavon, Celsius’ former chief revenue officer who was also charged in the case, lives in Israel and prosecutors said they believed he was abroad.

Three US regulators issued parallel civil lawsuits on Thursday.

The Securities and Exchange Commission is seeking to fine Mashinsky and ban him from the cryptocurrency industry, while the Commodity Futures Trading Commission and the Federal Trade Commission are seeking monetary penalties.

SEC Enforcement Director Gurbir Grewal said his agency is working to protect investors who have suffered losses. “Ultimately, the defendants’ elaborate crypto fraud collapsed under its own weight,” he said, “when their lies were exposed.” , , The Celsius platform is no longer supported.”

Neither Celsius nor Mashinsky’s attorney immediately responded to requests for comment.

Celsius filed for bankruptcy last July following a 2022 debacle in the crypto markets, when popular tokens such as bitcoin and ether lost more than half their value.

Last month, it forced hundreds of thousands of investors out of their funds in response to ever-increasing withdrawal requests.

Mashinsky was sued in January by New York Attorney-General Letitia James for allegedly “defrauding hundreds of thousands of investors”. , , Out of cryptocurrencies worth billions of dollars”. He has denied wrongdoing.

His lawyers said in May that James’ claim was based on “unfounded inference” and that Celsius’ “ultimate collapse was caused by a series of catastrophic, extraneous events”.

However, in a lawsuit filed on Thursday, the SEC accused Celsius of engaging in “risky business practices” and making non-collateralized loans to generate revenue, “placing the entire Celsius enterprise at grave risk.” It added that Celsius “often forked over 80 per cent of its revenue to meet the company’s interest payment obligations – a business practice that was hidden from investors”.

The SEC said that Celsius and Mashinsky had falsely claimed that the platform had 1 million active users, contrary to the company’s own internal data showing that approximately 500,000 users had deposited crypto assets with it.