Breaking News: Former CEO of bankrupt crypto lender Celsius, Alex Mashinsky, has been arrested and is facing lawsuits from multiple U.S. financial regulators. The Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC) have filed complaints against Mashinsky and Celsius regarding allegedly misleading statements about the state of the company’s business.
Mashinsky, 57, is accused of orchestrating a scheme to defraud customers of Celsius Network and its affiliated entities, according to an unsealed indictment. Bloomberg reported that Mashinsky was arrested on Thursday morning in connection with these charges.
Celsius, known for offering high interest rates on digital-asset deposits, experienced financial distress and filed for bankruptcy after the collapse of the TerraUSD stablecoin and a downturn in the crypto market in May 2022. These events left Celsius unable to meet customer withdrawal demands.
The FTC has entered into a settlement with Celsius, permanently prohibiting the company from handling customer assets. As part of the settlement, a judgment payment of $4.7 billion has been suspended, allowing for the return of customer assets.
The SEC has alleged that Mashinsky and Celsius made misleading statements to entice investors to purchase their proprietary CEL token and participate in the Earn Interest Program, which promised high returns on crypto deposits. Additionally, Mashinsky is accused of misrepresenting Celsius’s financial performance, including falsely claiming a $50 million raise from an initial coin offering. Earlier this year, Mashinsky was sued by the New York Attorney General for defrauding New York investors by providing false information about the lender’s safety.
These actions against Celsius and Mashinsky reflect a larger trend of civil and criminal cases targeting the cryptocurrency industry. Several industry players have faced charges for alleged misconduct, including FTX co-founder Sam Bankman-Fried and prominent exchanges such as Binance, Coinbase, and Kraken, all of whom have been sued by the SEC this year.
In May, some of Celsius’s assets were auctioned off to a consortium of investors as part of the bankruptcy proceedings. The SEC court filing revealed that Celsius incurred over $800 million in losses in 2021 and approximately $165 million in losses in Q1 2022. Internal discussions within the company reportedly expressed concerns about its financial stability, with one employee referring to Celsius as a “sinking ship.” Nevertheless, the FTC lawsuit alleges that Mashinsky and others continued to attract new customers through misleading claims about Celsius’s financial stability, including a $750 million insurance policy for deposits. The CFTC also filed a complaint against Mashinsky and Celsius echoing similar accusations.
These developments highlight the ongoing regulatory scrutiny faced by the cryptocurrency industry, with authorities taking actions against companies and individuals in response to alleged misconduct and misleading practices.
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