Title: Founder of Celsius Network, Alex Mashinsky, Arrested on Charges of Fraud and Market Manipulation
Subtitle: US regulators issue civil lawsuits against Mashinsky, while Celsius accepts responsibility for alleged scheme
Date: [Insert Date]
New York City, NY – Alex Mashinsky, the founder of the bankrupt cryptocurrency lender Celsius Network, was arrested by US authorities and charged with fraud and market manipulation. Prosecutors allege that Mashinsky deceived investors into investing billions of dollars into Celsius by falsely portraying it as a safe platform for depositing crypto assets and earning interest.
According to an indictment unsealed after Mashinsky’s arrest, Celsius operated as a risky investment fund that was far less profitable than it claimed to be. Prosecutors also stated that Celsius used some customers’ funds to manipulate the market for its own cryptocurrency token called CEL, allowing the company to sell its token holdings at inflated prices.
Meanwhile, Celsius, which is currently under the management of restructuring professionals led by former JPMorgan Chase banker Chris Ferraro, has accepted responsibility for its involvement in the alleged scheme. This admission is part of a non-prosecution agreement reached with the Department of Justice.
Mashinsky, who was scheduled to appear in court in New York on Thursday, plans to vigorously defend himself against the charges. Roni Cohen-Pavon, former chief revenue officer of Celsius and also charged in the case, is believed to be residing abroad.
Three US regulators, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission, and the Federal Trade Commission, have issued parallel civil lawsuits against Mashinsky. The SEC seeks to impose fines and ban Mashinsky from the cryptocurrency industry, while the other two agencies are seeking monetary penalties.
Gurbir Grewal, the enforcement director of the SEC, emphasized the agency’s commitment to protecting investors who suffered losses due to the defendants’ actions. He stated, “Ultimately, the defendants’ elaborate crypto fraud collapsed of its own weight when their lies could no longer prop up the Celsius platform.”
Lawyers representing Mashinsky adamantly deny the allegations, stating that he denies any wrongdoing and looks forward to defending himself in court. Celsius did not immediately respond to requests for comment.
Celsius filed for bankruptcy in July of last year following the significant downturn in the crypto market. The company had previously faced backlash after locking out hundreds of thousands of investors from accessing their funds in response to a surge in withdrawal requests.
In January, Mashinsky was sued by New York attorney-general Letitia James for allegedly defrauding hundreds of thousands of investors of billions of dollars in cryptocurrency. However, Mashinsky’s lawyers argued that James’s claims were based on baseless conclusions and that Celsius’s downfall was the result of external factors.
The SEC’s lawsuit against Celsius alleges that the company engaged in risky trading practices and made uncollateralized loans to generate revenue, which posed significant risks to the entire enterprise. The agency also accuses Celsius and Mashinsky of providing false information about the platform’s user base, claiming to have 1 million active users when internal data showed only approximately 500,000 users had deposited crypto assets.
As the legal proceedings continue, the cryptocurrency industry faces heightened scrutiny, with regulators working to maintain investor trust and integrity within the market.