Alexander Mashinsky, founder and CEO of bankrupt Celsius Network has been arrested and charged by US authorities
Former Celsius Network CEO and founder Alexander Mashinsky has been arrested Thursday on federal securities fraud charges.
Damian Williams, the United States Attorney for the Southern District of New York, and the FBI announced they have charged Alexander Mashinsky with securities fraud, and commodities fraud.
Furthermore, Mashinsky was charged “wire fraud for defrauding customers and misleading them about core aspects of the company he founded, including Celsius’s success, profitability, and the nature of the investments Celsius made using customer funds.”
In July 2022 New Jersey-based Celsius Network filed for Chapter 11 bankruptcy protection, days after Vermont’s Department of Financial Regulation (DFR) had warned Celsius was “deeply insolvent and lacked the assets and liquidity to honour its obligations to account holders and other creditors.”
The bankruptcy move came after Celsius Network in June 2022 had frozen all withdrawals, swaps, and transfers between customer accounts, citing “extreme” conditions.
Celsius, which had a value of $12bn was one of the biggest crypto lending platforms in the US, which allowed users to lend out their tokens as collateral for other crypto projects in exchange for annual yields of up to 17 percent.
But investor interest in such high-risk areas dropped off dramatically after the collapse of the TerraUSD “stablecoin” in May 2022, which along with the Luna coin was linked to a similar high-yield scheme.
Then the collapse of FTX in October triggered another investor retreat.
According to US authorities, both Alexander Mashinsky and the former chief revenue officer of Celsius, Roni Cohen-Pavon, are further charged with conspiracy, securities fraud, market manipulation, and wire fraud for illicitly manipulating the price of CEL, Celsius’s proprietary crypto token, all while secretly selling their own CEL tokens at artificially inflated prices.
In all Mashinsky, 57, has been charged with seven criminal counts, while Celsius’ former chief revenue officer, Roni Cohen-Pavon, was charged with four criminal counts.
If convicted, Mashinsky and Cohen-Pavon, face decades in prison.
“Exactly one year ago today, Celsius Network, a crypto platform that, at its height, managed approximately $25 billion in customer assets, filed for bankruptcy protection in the Southern District of New York,” said US Attorney Damian Williams.
“Over the course of the past year, we have worked quickly to get to the bottom of what led to Celsius’s collapse and to understand how a platform that advertised itself as the ‘safest place for your crypto’ could have left investors holding billions of dollars in losses,” said Williams. “Today we have the answer.”
“This case, like the others my Office has recently announced alleging fraud in the crypto economy, may appear complicated,” said Williams. “But the message we send today is quite simple: if you rip off ordinary investors to line your own pockets, we will hold you accountable.”
“As alleged in the indictment, Mashinsky and Cohen-Pavon knowingly engaged in complex financial schemes – deliberately misrepresenting the company’s business model and criminally manipulating the value of Celsius’s proprietary crypto token CEL – while serving in leadership roles at Celsius,” added FBI Acting Assistant Director in Charge Christie M. Curtis.
The US Commodity Futures Trading Commission and the Federal Trade Commission also filed lawsuits against Celsius and Mashinsky.
The FTC said it had reached a settlement with Celsius that will permanently ban it from handling customers’ assets.