Celsius Could Face Lawsuit from CFTC For Violating Rules

sources familiar with the matter recently said that investigators at the U.S. Commodities and Futures Trading Commission (CFTC) that bankrupt crypto lender Celsius Network along with its CEO Alex Mashinsky broke regulatory rules before the implosion last year.

The sources added that if a majority of the CFTC Commissioners agree to this, the agency could file a case in the federal court this month. One of the sources said that attorneys from the enforcement unit have determined that Celsius misled investors without registering with the regulatory. Also, CEO Alex Mashinsky flouted major rules.

Crypto lender Celsius Networks gained massive popularity during the bull run of 2021 by offering loans and paying hefty interest on virtual token deposits. Back then, Mashinsky claimed that these deposits were as safe as that with banks.

However, last year’s blow-up of the Terra ecosystem led to a widespread contagion in the crypto space with Celsius being a major victim of it. Besides, it also exposed several risky bets from Celsius. Soon after, Celsius Networks faced major withdrawals from the platform finally leading them to bankruptcy.

Legal Action Against Celsius Networks

After a major blow-up last year, Celsius Networks has been facing scrutiny from some of the top US regulators. The Securities and Exchange Commission (SEC) and federal prosecutors in Manhattan are also looking into Celsius, as mentioned in bankruptcy filings.

Celsius’s major collapse has resulted in legal action, including accusations from New York Attorney General Letitia James. She claimed that Mashinsky, the founder of Celsius, made untrue statements about the safety of the crypto platform and gave misleading information about the company’s worsening financial situation. In a lawsuit filed in January, James alleged that Mashinsky defrauded numerous investors, including over 26,000 individuals from New York, out of billions of dollars.

US authorities have been filing several cases this year, and if a federal enforcement action is taken against Celsius and Mashinsky, it would be the latest addition to this series of legal actions. In recent developments, Celsius Network has got the green light for converting the exchange’s altcoins into BTC.

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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.