Alex Mashinsky, CEO of Celsius on stage in Lisbon for Web Summit 2021
Piaras Ó Midheach | Sports archive | fake images
Former Celsius CEO Alex Mashinsky was arrested Thursday on federal securities fraud charges, a source told CNBC as the bankrupt crypto exchange agreed to pay a $4.7 billion settlement with government regulators.
The settlement is one of the largest in FTC history, close to the record $5 billion fine imposed on Meta in 2019, and highlights what the FTC described as repeated deceptions by Celsius and Mashinsky.
Federal prosecutors also charged Mashinsky with securities, commodities, and wire fraud, as well as various counts of securities fraud and manipulation. If convicted, Mashinsky and a co-defendant, Roni Cohen-Pavon, face decades in prison.
“Mashinsky misrepresented, among other things, the safety of Celsius’ return-generating activities, the profitability of Celsius, the long-term sustainability of Celsius’ high reward rates, and the risks associated with depositing crypto assets with Celsius,” federal prosecutors said in a charge. document.
The settlement, announced by the FTC, will not be paid until the company can return what is left of the client’s assets in bankruptcy proceedings.
The concurring SEC proceedings are against Mashinsky and Celsius, and as federal charges aIt alleges that Mashinsky misled investors and fraudulently manipulated the price of the Celsius exchange token, CEL.
The SEC has alleged that Mashinsky and his company “misrepresented” the company’s “core business model and risks to investors” by allegedly stating that Celsius did not engage in risky transactions and paid out most, but not all, proceeds from the company to investors.
“Neither of these assertions,” the SEC alleged, was true. Celsius had allegedly experienced, for example, “hundreds of millions of dollars” in default on institutional loans from him.
Both the charging documents from the New York federal prosecutors and the SEC complaint also describe the Celsius exchange token as a security. The definition of a security and the SEC’s oversight of crypto markets has been heavily challenged by other crypto exchanges in recent months.
Earlier this year, New York prosecutors charged Mashinsky with orchestrating a $20 billion fraud against investors. CNBC previously reported widespread problems for years that plagued the crypto exchange long before it filed for bankruptcy in 2022.