Alex Mashinky, the former CEO of bankrupt cryptocurrency lending platform Celsius, was reportedly arrested by U.S. authorities on Thursday morning, July 13. Federal prosecutors also arrested the firm’s chief revenue officer, Roni Cohen-Pavon.
The United States Department of Justice (DOJ) indicted the Celsius executives on counts of securities fraud, wire fraud, commodities fraud, and for manipulating the price of Celsius’s CEL token. The DOJ accused Alex Mashinky and Roni Cohen-Pavon of misleading customers about the company’s financials.
Internal communications obtained by federal prosecutors revealed a conversation between the executives discussing how Celsius openly bought CEL tokens. The move artificially held up the asset’s price, easily construed as public interest in the platform.
Mashinky’s arrest was swiftly followed by separate lawsuits against Celsius and its CEO by the Securities and Exchange Commission (SEC). Commodity and Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC). The filings allege distinct levels of fraud by Alex Mashinky and Celsius, which contributed to the company’s collapse in 2022.
Lawsuits Against Crypto Lender Celsius
The SEC accused Celsius of raising billions of dollars from investors through unregistered and fraudulent offers of digital asset-based securities. Celsius also allegedly used misleading statements to hide financial losses and present its “Earn Interest Program” as a safe investment.
The CFTC’s lawsuit features similar wording. According to the commodities regulator, Celsius misrepresented “the safety and profitability of its digital asset-based finance platform.” Even as market conditions deteriorated, the firm continued to “promote the safety and viability of Celsius and failed to disclose these losses to customers.”
Lastly, the FTC accused the bankrupt crypto lender of breaching the Federal Trade Commission Act by lying about its reserves. Despite assuring investors that it had always maintained sufficient funds, Celsius filed for bankruptcy in July 2022. The company declared a $1.19 billion deficit at the time and abruptly halted withdrawals on the platform.
Meanwhile, the recent cases against Celsius are not entirely surprising. Former employees have reported several operational issues that faced the company. In one case, CEO Mashinky had suddenly assumed the role of trading the company’s assets, despite having an experienced trading desk.
