TL;DR Breakdown
- The US SEC crypto crackdown continues, and Celsius and Alex Mashinsky are its most recent victims.
- The arrest of Mashinsky and the lawsuit against Celsius come only months after the SEC filed cases against Binance and Coinbase.
- The lawsuit and arrest came on the same day, with Celsius officially announcing that the firm has initiated voluntary Chapter 11 proceedings.
Description
According to a Thursday court filing, the SEC is prosecuting defunct crypto lender Celsius Network and the company’s former CEO Alex Mashinsky for four counts of fraud and one count of securities violations. Alex Mashinsky, the former CEO of the bankrupt crypto lender Celsius, was reportedly arrested on the morning of July 13. The news … Read more
According to a Thursday court filing, the SEC is prosecuting defunct crypto lender Celsius Network and the company’s former CEO Alex Mashinsky for four counts of fraud and one count of securities violations.
Alex Mashinsky, the former CEO of the bankrupt crypto lender Celsius, was reportedly arrested on the morning of July 13. The news broke shortly after the United States Securities and Exchange Commission filed a lawsuit against the crypto lender on the same day.
From the boardroom to the courtroom – Alex Mashinsky is reportedly arrested
Bloomberg reported that the former CEO was arrested following an investigation into the company’s collapse, citing sources with knowledge of the situation. According to reports, Alex Mashinsky was charged with fraud and market manipulation. The arrest of Mashinsky and the lawsuit against Celsius come only months after the SEC filed cases against Binance and Coinbase.
On July 14, 2012, Celsius Network filed for bankruptcy protection. Alex Mashinsky was recently found culpable by Commodity Futures Trading Commission investigators, who determined that the former CEO violated numerous U.S. regulations prior to the company’s collapse in 2022.
The investigation against the former CEO began on 5 January after the New York Attorney General filed a lawsuit against Mashinsky. The New York Attorney General alleged that the former chief executive officer misled investors and caused billions of dollars in losses.
The problems for Celsius and its former CEO began in June of last year when the crypto lending platform abruptly suspended withdrawals. Five U.S. states securities regulators launched an investigation into Celsius on June 16, 2022, and the platform filed for bankruptcy a month later.
A CFTC investigation revealed that Celsius and its former CEO violated several banking laws while their customer base was suffering from the larger crypto winter that saw the implosion of the Terra-Luna ecosystem followed by the collapse of the crypto hedge fund Three Arrow Capital and FTX joined in later on.
Celsius Network sued by SEC, CFTC, and FTC
The DOJ charges were backed by an upsurge of lawsuits filed against Alex Mashinsky and Celsius by the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC).
The move comes after the Commodity Futures Trading Commission (CFTC) apparently determined that Celsius and Mashinsky violated various US regulations before the company’s downfall last year.
Bloomberg also reported on 6 July that attorneys from the CFTC’s enforcement section determined that Celsius misled investors and failed to register with the regulator, while Mashinsky violated various U.S. regulations.
The action and arrest happened on the same day that Celsius announced that it had launched voluntary Chapter 11 procedures. According to the company, Celsius has $167 million in cash on hand, Celsius claims that the monies will be used to assist “certain operations during the restructuring process.”
This is the right decision for our community and company […] We have a strong and experienced team in place to lead Celsius through this process. I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company.
Alex Mashinsky.
In a separate lawsuit, the CFTC alleged that the company and Mashinsky engaged in a “scheme to defraud hundreds of thousands of customers by misrepresenting the safety and profitability of its digital asset-based finance platform.” Despite deteriorating market conditions, the company “promoted the safety and viability of Celsius and failed to disclose these losses to customers,” according to the filing.
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