Alex Mashinksy, co-founder and former CEO of insolvent crypto lender Celsius was arrested on Thursday following an investigation into the company’s collapse, according to a U.S. Department of Justice (DOJ) indictment.
Mashinsky and others are charged with seven counts including securities fraud, commodities fraud, wire fraud and conspiracy to manipulate the price of Celsius’ token CEL.
The DOJ indictment was accompanied by a slew of separate lawsuits against Mashinsky and Celsius by the U.S. Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) and Federal Trade Commission (FTC).
The lending platform filed for bankruptcy in July 2022, and crypto consortium Fahrenheit recently won a bid to acquire its assets. In January, New York Attorney General Letitia James sued Mashinsky for allegedly misleading investors about the firm’s health leading up to its bankruptcy filing. Mashinsky later called the accusations “baseless” and said they were informed by online misinformation.
The DOJ accused Mashinsky and the firm’s Chief Revenue Officer Roni Cohen-Pavon of orchestrating “a years long scheme to mislead customers” on the market value of the company’s value and interest in CEL. The indictment added Mashinsky made false and misleading public statements about his own sales of CEL. Cohen-Pavon was also arrested on Thursday, according to a Bloomberg report.
“Mashinsky portrayed Celsius as a modern-day bank, where customers could safely deposit crypto assets and earn interest. In truth, however, Mashinsky operated Celsius asa risky investment fund, taking in customer money under false and misleading pretenses,” the indictment said, adding that Mashinsky misled investors about loans being collateralized, counter-parties defaulting, and regulatory scrutiny.
The SEC meanwhile accused the firm and Mashinsky of securities fraud, in a lawsuit filed on the same day. In its complaint, the SEC asserted that CEL and Celsius’ Earn interest Program constituted securities.
“In this case, Celsius offered and sold CEL and the Earn Interest Program as securities….. Celsius and Mashinsky never filed a registration statement or had one in effect with the SEC for their offers and sales of securities through the Earn Interest Program,” the complaint said.
In a separate complaint, the CFTC accused the company and Mashinsky of engaging in a “scheme to defraud hundreds of thousands of customers by mispresenting the safety and profitability of its digital asset-based finance platform.” Despite deteriorating market conditions, the company continued to “promote the safety and viability of Celsius, and failed to disclose these losses to customers,” the CFTC filing added.
The CFTC alleges the firm violated federal commodities regulations, committed fraud and failed to register as a Commodity Pool Operator and provide relevant disclosure documents.
“Defendants assured customers that Celsius maintained sufficient reserves to meet customer obligations,” said a complaint by the FTC, which accused the firm of violating the Federal Trade Commission Act “in connection with the marketing and sale of cryptocurrency lending and custody services.”
The FTC announced it had reached a settlement with Celsius Network “that will permanently ban it from handling consumers’ assets,” and block it from “offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets.”
The FTC also charged former executives Shlomi Daniel Leon, Hanoch “Nuke” Goldstein and Mashinsky with tricking consumers into transferring crypto onto the platform. The regulator said the three executives have not agreed to the settlement, and that the case against them will proceed in federal court.
“The companies also agreed to a judgment of $4.7 billion, which will be suspended to permit Celsius to return its remaining assets to consumers in bankruptcy proceedings,” the FTC notice said.
Lawyers for Mashinsky, Celsius and the SEC did not immediately respond to a CoinDesk request for comment.
Jack Schickler and Amitoj Singh contributed reporting.
UPDATE (July 13, 13:20 UTC): Adds CFTC, FTC has filed suit and more detail throughout.
UPDATE (July 13, 13:54 UTC): Adds detail from DOJ indictment.
UPDATE (July 13, 14:19UTC): Adds FTC settlement and details throughout.