Ex-Celsius CEO Alex Mashinsky Arrested As SEC, CFTC, FTC File Lawsuits Against Insolvent Crypto Lender ⋆ ZyCrypto

The former CEO of bankrupt crypto lender Celsius Network was reportedly arrested on Thursday. The news was accompanied by a series of lawsuits against Mashinsky and Celsius by the United States Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC). 

Mashinsky Arrested

The law has finally caught up to Alex Mashinsky.

The former Celsius CEO was arrested on Thursday after a probe into the company’s collapse, as per a U.S. Department of Justice (DOJ) indictment. Mashinsky was indicted on charges of securities fraud, wire fraud, and intention to manipulate the price of Celsius’ token CEL.

Celsius, which was one of the crypto market’s highest-profile collapses, halted withdrawals in June 2022, citing “extreme market conditions,” and filed for bankruptcy protection a month later. At one point the New Jersey-based company held $30 billion in assets. A court-ordered bankruptcy examiner’s report showed that Celsius made extremely risky investment bets with clients’ funds.

According to Bloomberg sources, Mashinsky contrived a scheme to defraud customers of Celsius Network between 2018 and June 2022. 

Celsius was a popular crypto lending platform that allowed users to deposit cash and earn returns on their digital assets. However, following the implosion of Terra’s algorithmic stablecoin UST and the subsequent crypto market downturn, the firm was unable to fulfil a wave of customer withdrawals.

Celsius’ chief revenue officer Roni Cohen-Pavon was also arrested alongside Mashinsky.

Mashinsky’s Legal Woes

To add to Mashinsky’s woes, the SEC accused him and Celsius of securities fraud in a suit filed today. In the complaint, the SEC declared that CEL and Celsius’ Earn product 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 filing read.

The SEC’s fellow regulators, the CFTC and FTC, also filed civil actions against the former figurehead and Celsius on the same day. 

The CFTC accused Mashinsky and Celsius of violating federal commodities regulations and participating in a “scheme to defraud hundreds of thousands of customers by mispresenting the safety and profitability of its digital asset-based finance platform.”

The suit by the FTC alleges that Mashinsky and the firm broke the Federal Trade Commission Act “in connection with the marketing and sale of cryptocurrency lending and custody services.”

Notably, Mashinsky is already facing a lawsuit filed by New York attorney general Letitia James in January this year. The AG accuses him of misleading Celsius investors, leading to billions of dollars in losses.