The ex-head of the bankrupt Celsius Mashinsky was arrested
Date: 2023-07-14 Author: Karina Ziganova Categories: BUSINESS
The former CEO of the now-bankrupt crypto lender Celsius, Alex Mashinsky, has been arrested. He was charged with six counts.
Federal prosecutors accused Mashinsky of manipulating the market and price of the native Celsius token (CEL), as well as various securities fraud and fraud. If Mashinsky and his accomplice Roni Cohen-Pavón are found guilty, they face several decades in prison. It is reported by Bloomberg
"Mashinsky lied about the safety of Celsius' revenue-generating activities, the profitability of Celsius, the long-term sustainability of Celsius' reward rates, and the risks associated with depositing crypto assets with Celsius," federal prosecutors said.
SEC Charges
The U.S. Securities and Exchange Commission (SEC) said Mashinsky and his firm "distorted" the company's core business model and concealed risks to investors. Thus, the head of the company raised billions of dollars through the sale of unregistered securities and misled investors about the financial success of the company.
"None of these claims are true. For example, Celsius allegedly experienced hundreds of millions of dollars in defaults on its institutional loans," the SEC said.
Fine of $4.7 million
The U.S. Federal Trade Commission (FTC) also fined the crypto lender $4.7 million, however, the collection of this amount will be suspended to "allow Celsius to return the remaining assets to customers as part of bankruptcy proceedings."
In addition, the FTC accused Celsius of providing $1.2 billion in unsecured loans, lying that it had a $750 million user insurance policy.
Moreover, Celsius and its subsidiaries will now be permanently prohibited from "offering, selling, or promoting any products or services that can be used to deposit, exchange, invest, or withdraw any assets."
"[Celsius co-founder Hanoch] Goldstein and Mashinsky defended themselves by withdrawing significant amounts of cryptocurrency from Celsius two months before the company filed for bankruptcy. Subsequently, consumers lost access to their savings," the regulator said in a complaint.
Celsius bankruptcy
In 2022, the collapse of the Terraform Labs ecosystem led to a general downturn in the crypto market. The crypto lender stubbornly denied the big losses, but Celsius users started withdrawing money from the platform in large volumes anyway. As a result, the crypto lender froze withdrawals in June 2022. A month later, Celsius filed for bankruptcy.
After going bankrupt, Mashinsky faced lawsuits due to false claims about the security of the crypto platform and concealment of the company's deteriorating financial condition. However, he believes that his firm collapsed due to "catastrophic external factors" and attacks from the New York attorney general's office.
