Celsius Hit with Multiple Lawsuits as Founder Alex Mashinksy Is Arrested

<p>Alexander
Mashinsky, the
Founder of the bankrupt cryptocurrency lender Celsius Network was arrested
today (Thursday) in New York. The arrest comes as the United States Department
of Justice (DOJ) and several regulators slammed multiple lawsuits against the
troubled Founder and his company. </p><p>DOJ, SEC,
CFTC and FTC Head to Court</p><p>In the <a href="https://www.docdroid.net/KeavfYy/sdny-1-23-cr-00347-ua-1-0-pdf" target="_blank" rel="follow">complaint filed by DOJ</a> before the district court in
New York, United States Attorney Damian Williams unveiled seven counts of
charges against Mashinksy and Roni Cohen-Pavon, Celsius’ former Chief
Revenue Officer. These include allegations of securities, commodities and wire
fraud as well as token
manipulation.</p><blockquote><p lang="en" dir="ltr">UPDATE: Per DOJ indictment, legal minds expect Alex Mashinsky to face a lengthy prison sentence. “These (DOJ) charges, and the scale of capital involved, means he doesn’t have a meaningful path to a plea; looking at 15-20 years.”Securities fraud, wire fraud, conspiracy:…</p>— Andrew (@AP_Abacus) <a href="https://twitter.com/AP_Abacus/status/1679486672205934592?ref_src=twsrc%5Etfw">July 13, 2023</a></blockquote><p>The US law enforcement agency accused Mashinky of luring investors by lying about
Celsius’ financial status and inflating the price of the business’ native token
CEL. Because the former Celsius CEO ‘falsely portrayed’ Celsius as a 'safe and
secure institution’, the digital lending business ‘grew exponentially’
to become one of the biggest crypto lenders in the world, ‘purportedly’
managing about $25 billion at its peak period in the fall of
2021.</p><p><a href="https://financemagnates.com/" target="_blank" rel="follow">Finance
Magnates</a> reported that Celsius, which entered the markets in 2018 through an
initial coin offering, <a href="https://www.financemagnates.com/cryptocurrency/news/crypto-lender-celsius-files-for-bankruptcy-in-new-york/" target="_blank" rel="follow">filed for bankruptcy</a> in July last year, weeks after <a href="https://www.financemagnates.com/cryptocurrency/news/celsius-suspends-crypto-withdrawals-due-to-market-volatility/" target="_blank" rel="follow">suspending withdrawal</a> on its platform, citing
market <a href="https://www.financemagnates.com/terms/v/volatility/">volatility</a>.</p><p>In <a href="https://www.docdroid.net/d4BiIvc/sdny-1-23-cv-06005-1-0-pdf" target="_blank" rel="follow">its own lawsuit</a> before the same New York court,
the Securities and Exchange Commission (SEC) accused Celsius and Mashinsky of
committing offences similar to those of the DOJ. However, it added that the
company and its former CEO raised billions of dollars from investors “through
unregistered and fraudulent offers and sales of crypto assets
securities.” </p><p>“Thousands
of retail investors have experienced significant financial hardship as a result
of Celsius’s and Mashinsky’s illegal conduct, and today we are holding Celsius
and Mashinsky responsible for defrauding thousands of retail investors,” Gurbir S. Grewal, Director of
the SEC’s Enforcement Division, stated in <a href="https://www.sec.gov/news/press-release/2023-133" target="_blank" rel="follow">a statement</a>.</p><p>Furthermore,
the charges filed by the Commodities Futures Trading Commission (<a href="https://www.financemagnates.com/terms/c/cftc/">CFTC</a>) and the
Federal Trade Commissions are similar to those of the DOJ and the SEC. However,
the CFTC in its lawsuit—the first against a digital
asset lender—said Celsius and Mashinsky
operated a “massive [‘unregistered’] commodity pool scheme involving digital
assets commodities.”</p><p>However,
the derivatives regulator in <a href="https://www.cftc.gov/PressRoom/PressReleases/8749-23">a statement</a> said it reached an agreement with
Celsius to settle the charges through a court order that will permanently bar the company from engaging
in such activities in the future. On the other hand, CFTC will continue its litigation against Mashinsky and seek an order for
the return of customers’ assets and illicit profit as well as a civil monetary
penalty. In addition, the derivatives watchdog wants the court to slam a permanent trading and
registration ban on the Celsius Founder.</p><p>FTC Fines Celsius
Network $4.7 Billion</p><p>Meanwhile, in addition to <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/2223137celsiusnetworkcomplaint.pdf">raising
similar allegations</a> at the New York court, the United States Federal
Trade Commission (FTC)accused
Celsius and its executives of lying to investors that they maintained a $750
million insurance policy for their deposits. On top
of that, they deceived investors that they kept sufficient reserves to meet their customer obligations to them. </p><p>“Far from
securing customers’ cryptocurrency deposits, Celsius took title to and
misappropriated these deposits totalling more than $4 billion,” FTC explained
in <a href="https://www.ftc.gov/news-events/news/press-releases/2023/07/ftc-reaches-settlement-crypto-platform-celsius-network-charges-former-executives-duping-consumers" target="_blank" rel="follow">a statemen</a>t, citing the complaint. “The
company used consumer deposits to fund its operations, pay rewards to other
customers, borrow from other institutions, and make high-risk investments,
which even the company acknowledged often lost money.”</p><p>What is more, the FTC
alleged that Celsius lacked any system to track its assets and liabilities
until mid-2021. And as a result of these, FTC issued a $4.7 billion fine on Celsius and its affiliates. It, however, said that it has reached an
agreement with the companies to suspend the ‘judgment’ in order to “permit Celsius to
return its remaining assets to customers in bankruptcy proceedings.”</p><p>Moreover, FTC plans to continue its case against Mashinky and other Celsus Co-Founders, Shlomi Daniel Leon
and Hanoch ‘Nuke’ Goldstein, who it said have not agreed to a
settlement. </p>

This article was written by Solomon Oladipupo at www.financemagnates.com.