Former Celsius CEO Arrested for Securities Fraud

The former CEO of Celsius, Alex Mashinsky, has found himself under arrest on federal securities fraud charges. The beleaguered crypto exchange simultaneously agreed to a staggering $4.7 billion settlement with the Federal Trade Commission (FTC).

However, that was not the end of their woes, as Celsius and Mashinsky were also hit with lawsuits from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The allegations were nothing short of serious, accusing them of scheming to defraud investors out of billions.

Today we charged Celsius and its Alex Mashinsky with fraud and the unregistered offer and sale of securities.
https://t.co/BoulI5RzVh pic.twitter.com/E9ygRtwC7g

— U.S. Securities and Exchange Commission (@SECGov) July 13, 2023

Celsius Executives Facing Decades in Prison if Found Guilty

The courtroom drama unfolded as Mashinsky, along with co-defendant Roni Cohen-Pavon, entered a plea of not guilty in Manhattan federal court. According to a CNBC report, the charges they faced were not minor, ranging from securities, commodities, and wire fraud to various securities manipulation and fraud offenses. If found guilty, they could potentially face decades behind bars.

Record-Breaking FTC Settlement

The FTC settlement was nothing short of historic, ranking among the largest in the commission’s history, only surpassed by the colossal $5 billion fine Meta faced in 2019. The FTC’s investigation revealed a series of alleged deceptions perpetrated by Celsius and Mashinsky, leaving investors feeling betrayed and defrauded.

According to charging documents presented by the office of U.S. Attorney Damian Williams, Mashinsky stood accused of misleading investors on several critical aspects of Celsius’s operations.

From the safety of its yield-generating activities to the company’s profitability and even the sustainability of the high reward rates offered, nothing seemed exempt from misrepresentation. Moreover, the risks associated with depositing crypto assets with Celsius were allegedly downplayed to unsuspecting customers.

Meanwhile, the SEC proceeded with its own allegations, suggesting that Celsius and Mashinsky had misled investors and manipulated the price of Celsius’ exchange token, CEL. The company’s business model and the risks involved were also deemed to have been misrepresented, with claims that Celsius shied away from risky trading and distributed most, but not all, of its revenue to investors—an assertion the SEC found to be patently false.

Final Word

As the case unfolds, the entire crypto industry is on high alert, watching how the proceedings will impact the definition of securities and the extent of the SEC’s regulatory reach. The outcome of this landmark case could reshape the future of crypto markets and investor protections.