Former CEO of cryptocurrency lending firm Celsius, Alex Mashinsky, and the company’s chief income officer, Roni Cohen-Pavon, have been arrested on securities fraud charges. The US Department of Justice accuses them of illegally manipulating the price of the cryptocurrency Celsius (CEL) in order to sell tokens at inflated prices.
Recall that a year ago, Celsius attracted attention when it unexpectedly blocked the ability to withdraw funds and make inter-account transfers due to the turmoil in the cryptocurrency market, citing “extreme market conditions”. A month later, the largest cryptocurrency lender Celsius filed for bankruptcy.
On Thursday, the Justice Department released allegations against Mashinsky and Cohen-Pavon of overvaluing a Celsius cryptocurrency called CEL and lying to Celsius customers about the token, their operations and the company’s general health. The Justice Department alleges that Mashinsky and Coen-Pavon illegally manipulated CEL’s price and tricked investors into buying tokens at inflated prices. The Justice Department claims that the sale of the tokens brought in $3.6 million for Cohen-Pavon and $42 million for Mashinsky.
Prosecutors also accused Mashinsky and Coen-Pavon of depicting Celsius as a place where customers “secure» Store crypto assets and earn interest. However, the Justice Department claims Mashinsky used Celsius as “risky mutual fundwhere he wentClients’ money is stolen under false and deceptive pretenses“.
In addition to the arrests of Mashinsky and Cohen-Pavon, Celsius also received complaints from three federal agencies, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC). All three authorities accuse Celsius and Mashinsky of fraud.
The proposed settlement between the FTC and Celsius accuses Celsius of fraudulent and dishonest practices and fines $4.7 billion. In addition, the FTC accuses Mashinsky and two former executives of misleading consumers into believing their assets are safe and always available, and prohibits the company from handling client assets.
“Celsius promoted a new business model but committed an old-fashioned scamSamuel Levine, director of the FTC’s Office of Consumer Protection, said in a statement. — Today’s move to ban Celsius from handling people’s money and hold its executives accountable should make it clear that new technology is not above the law.“.
This case clearly shows the potential risks and problems that can arise without regulation in the cryptocurrency space. At the same time, allegations by several US federal agencies confirm their determination to curb illegal activities and protect investors’ interests. This precedent can be an important signal for all participants in the cryptocurrency market about the need to comply with laws and ensure transparency of their activities.