Former Celsius CEO Alex Mashinsky Arrested on Fraud Charges
Alex Mashinsky, the co-founder and former CEO of the now-insolvent crypto lender Celsius, was arrested on Thursday following an investigation into the company’s collapse. The U.S. Department of Justice (DOJ) indictment charged Mashinsky and others with seven counts, including securities fraud, commodities fraud, wire fraud, and conspiracy to manipulate the price of Celsius’ token CEL.
The lending platform filed for bankruptcy in July 2022, and crypto consortium Fahrenheit recently won a bid to acquire its assets. New York Attorney General Letitia James had previously sued Mashinsky for allegedly misleading investors about the firm’s health leading up to its bankruptcy filing. Mashinsky denied the accusations, calling them “baseless” and attributing them to online misinformation.
The DOJ accused Mashinsky and the firm’s Chief Revenue Officer Roni Cohen-Pavon of orchestrating a scheme to mislead customers about the market value of the company’s assets and interest in CEL. The indictment stated that Mashinsky made false and misleading public statements about his own sales of CEL. Cohen-Pavon was also arrested on Thursday.
The Securities and Exchange Commission (SEC) filed a lawsuit on the same day, accusing Celsius and Mashinsky of securities fraud. The SEC asserted that CEL and Celsius’ Earn Interest Program constituted securities and that the company had not filed a registration statement with the SEC for their offers and sales of securities.
In a separate complaint, the Commodity Futures Trading Commission (CFTC) accused Celsius and Mashinsky of defrauding customers by misrepresenting the safety and profitability of its digital asset-based finance platform. The FTC also charged Celsius Network with violating the Federal Trade Commission Act in connection with the marketing and sale of cryptocurrency lending and custody services.
The FTC announced a settlement with Celsius Network that will permanently ban it from handling consumers’ assets and offering certain products or services. Former executives Shlomi Daniel Leon, Hanoch “Nuke” Goldstein, and Mashinsky were charged with tricking consumers into transferring crypto onto the platform. The companies agreed to a judgment of $4.7 billion, which will be suspended to allow Celsius to return its remaining assets to consumers in bankruptcy proceedings.
Lawyers for Mashinsky, Celsius, and the SEC did not immediately respond to requests for comment. The case against Mashinsky and other former executives is ongoing in federal court.
