Celsius Founder Alex Mashinsky Arrested Following Fraud Allegations
Co-founder and former head of crypto-financial service Celsius, Alex Mashinsky, has been arrested in the United States. Previously, various US regulators had accused both him and his company, which went bankrupt earlier this year, of fraud.
In addition, Roni Cohen-Pavon, a former Celsius manager, was arrested. Both Mashinsky and Cohen-Pavon are accused of manipulating the price of their own cryptocurrency in order to be able to sell their own holdings at higher prices.
In 2022, crypto financial service Celsius went bankrupt after the crypto lending platform previously decided to suspend trading and withdrawals of customer deposits in response to “extreme market conditions.” In early 2023, a lawsuit was filed in New York against ex-boss Mashinsky for billions of dollars in fraud. The Attorney General there wants to achieve the payment of compensation.
Lawsuits from regulators, long prison terms
Now the Federal Trade Commission (FTC), the Commodity Futures Trading Commission (CFTC), and the Securities and Exchange Commission (SEC) of the United States also have complaints filed against Celsius and Mashinsky.
According to prosecutors, Mashinsky misled clients about the nature of his company and made it appear like a bank when in fact it was a high-risk mutual fund. Mashinsky himself is accused of seven criminal offenses by the US Attorney’s office in Manhattan, including securities, goods, and wire fraud. Cohen-Pavon faces four similar charges, including conspiracy to commit securities fraud, market manipulation, and wire fraud. He also faces up to five to 20 years in prison per charge.
Millions taken, but Mashinsky fights back
Mashinsky denies the allegations, according to his lawyer: “He looks forward to vigorously defending himself in court against these baseless allegations.” Mashinsky already pleaded not guilty in the previous New York trial. He had already resigned from his position as CEO at Celsius in 2022, before filing for bankruptcy.
According to the New York prosecutor’s office, he had previously made around $42 million from the sale of the cryptocurrency CEL issued by Celsius after manipulating the course accordingly. His former chief revenue officer, Cohen-Pavon, also raked in nearly $3.6 million from CEL sales at the same time.
FTC and Celsius settlement, but payment open
The FTC has also reached an agreement with Celsius, reports CNBC. The crypto financial service is set to pay the Trade Commission $4.7 billion. The company has agreed to the financial terms but will not make the payments until it recovers the remaining customer assets as part of the ongoing bankruptcy proceedings.
On the Celsius platform, customers could store cryptocurrency in a wallet and earn interest on it. The interest depended on the amount and type of deposit – up to 18 percent annual interest was sometimes offered. The coin deposit was then used for staking or loaned out to professional investors who do business with it. Celsius was one of the largest companies in the crypto lending field with over 1.7 million customers.
