Celsius and Alex Mashinsky Sued by Multiple U.S. Regulators

  • The U.S. SEC, CFTC, and FTC have all filed separate lawsuits against bankrupt crypto lender Celsius and its former CEO Alex Mashinsky, charging them with multiple counts of fraud.
  • Mashinsky was also arrested in New York on Thursday, and later charged by the Department of Justice with securities fraud, commodities fraud, and wire fraud.

Former Celsius CEO Alex Mashinsky on Centre Stage during day three of Web Summit, Lisbon, Portugal, 4 November 2021.Piaras Ó Mídheach/Web Summit via Sportsfile/Flickr

The U.S. Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC) filed separate lawsuits against Celsius and its co-founder and former CEO, Alex Mashinsky, on 13 July.

The former CEO was also arrested in New York, and indicted by the Department of Justice (DoJ) following a probe into Celsius’ collapse, Bloomberg reported on Thursday. According to the DoJ indictment, Mashinsky and other Celsius executives were charged with seven counts, including fraud, commodities fraud, wire fraud, and conspiracy to manipulate the price of Celsius’ own token, CEL.

The U.S. SEC accused the crypto lender and its former CEO of securities fraud, claiming that CEL and Celsius’ Earn product constituted securities. The regulator argued that Celsius and Mashinsky publicly misrepresented “significant financial events and the financial condition of the company” from the start of the CEL initial coin offering (ICO) in 2018 up until “days before Celsius halted customer withdrawals”.

Similar to the SEC, The CFTC’s complaint accused the two of engaging in a scheme to “defraud hundreds of thousands of customers” by mispresenting the safety and profitability of the Celsius platform. The CFTC alleged that the bankrpt crypto lender violated federal commodities regulations, committed fraud, and failed to register with the regulator.

The FTC’s lawsuit accused Mashinsky and other former executives of tricking consumers into transferring their crypto assets to the platform by falsely claiming that “Celsius maintained sufficient reserves to meet customer obligations”. The regulator also claimed the company had violated the Federal Trade Commission Act “in connection with the marketing and sale of cryptocurrency lending and custody services”.

The FTC later announced it had issued a $4.7 billion fine against the bankrupt crypto lender, but assured investors that the judgement will be suspended to allow Celsius to return its remaining assets to consumers in bankruptcy proceedings. The regulator further noted that Celsius and its affiliate companies will be permanently banned from “offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets”.

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October 3, 2023, 12:18 PM


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