14-7-2023 (NEW YORK) Alex Mashinsky, the founder and former CEO of bankrupt cryptocurrency lender Celsius, has been arrested and charged with fraud, according to federal prosecutors. The U.S. attorney’s office in Manhattan has filed seven criminal counts against Mashinsky, including securities, commodities, and wire fraud. The indictment accuses him of misleading Celsius customers about the company’s operations, particularly regarding how their money would be utilized. It alleges that Mashinsky portrayed Celsius as a bank while operating it as a high-risk investment fund.
Celsius provided a platform that allowed customers to earn returns on their crypto assets through weekly payments, take out loans using their crypto assets as collateral, and custody their crypto assets, as stated by the Department of Justice (DOJ).
The indictment claims that Mashinsky actively promoted Celsius through media appearances and the company’s website, including hosting a weekly program called “Ask Mashinsky Anything.” However, Celsius employees noticed false and misleading statements made during these programs and reportedly alerted Mashinsky, who allegedly disregarded their concerns.
By the autumn of 2021, Celsius had become a significant player in the crypto world, reportedly managing $25 billion in assets. However, amidst a crash in cryptocurrency values last year, the company filed for bankruptcy, leaving customers without access to their funds.
Both Mashinsky and Roni Cohen-Pavon, Celsius’s former chief revenue officer, have been charged with manipulating the price of Celsius’s proprietary crypto token. They are accused of secretly selling their own tokens at artificially inflated prices. According to the DOJ, Mashinsky personally profited around $42 million from the token sales, while Cohen-Pavon made at least $3.6 million.
The U.S. Securities and Exchange Commission (SEC) has also filed a lawsuit against Mashinsky and Celsius, alleging that the company deceived investors through unregistered and fraudulent offers and sales of crypto securities.
In a statement, FBI Acting Assistant Director in Charge Christie M. Curtis said, “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.”
