Celsius Ex-CEO Mashinsky Held on Fraud Charges

The former CEO of the cryptocurrency lending platform Celsius Network LLC and its related entities (Celsius), Alex Mashinsky, has reportedly been arrested on charges including fraud and conspiracy.

On the morning of July 13, the Ex-Chief Executive Officer of the Celsius Network, Alex Mashinsky, was held on fraud charges. The same day, the United States securities regulator, the SEC, sued Mashinsky and Celsius for providing fraudulent offers to the public and raising multi-million dollars in the process.

Celsius Ex-CEO Mashinsky Accused of Manipulating the Price of Celsius’s Cryptocurrency

Mashinsky was accused by the US Department of Justice of fraud and misrepresentation of his firm’s financial condition with the intention to manipulate the customers.

According to Bloomberg, prosecutors accused Mashinsky of increasing the price of Celsius’ native cryptocurrency CEL in order to lure customers into investing. In the process, it is believed that he was successful in pocketing $42 million from this fraud.

Celsius Collapsed in 2022

The Celsius Network was a major cryptocurrency firm until mid-2022, when it started showing signs of an impending collapse. Celsius was known for offering opportunities for its customers to earn high interest on their crypto deposits. However, in May 2022, it suddenly stopped all their withdrawals without any prior announcements or warning.

Soon after in June 2023, US security regulators came together to probe an investigation into Celsius and their sketchy activities. This perhaps put Mashinsky and Celsius in a tight spot, and they decided to file for bankruptcy.

It is believed the downfall of the cryptocurrency market, together with the decline of Terra’s ecosystem and its stablecoin UST caused severe blows to Celsius. As a result, the firm was neck deep in debt of over $1.19 billion when it finally filed for Chapter 11.

Celsius Ex-CEO Mashinsky Allegedly Orchestrated Scheme to Defraud Celsius Customers

The recent lawsuit accused Celsius Ex-CEO Mashinsky “of defrauding hundreds of thousands of investors, including more than 26,000 New Yorkers, out of billions of dollars worth of cryptocurrency”.

As per the lawsuit, despite’s Celsius deteriorating financial condition, Mashinsky was misleading customers into believing that it was a good investment opportunity. He repeatedly tried to lure customers into believing that Celsius “would take full responsibility for safeguarding investor assets, including from any shortfalls or loss of value caused by Celsius’s use or “deployment” of investors’ cryptocurrency assets”.

Mashinsky promised its investors a path of financial freedom by repeatedly projecting Celsius as a safe haven for investment. He often compared it with other security lending companies like Blackrock and Fidelity.

“On April 26, 2021, in a YouTube interview, Mashinsky stated that “the only difference between [securities] lending… and Celsius, which is digital asset lending, is that Celsius gives 80% of that to the depositor, to the user….”

— as per the lawsuit.

Mashinsky is accused of participating in a scheme with Celsius’s Chief Revenue Office Roni Cohen-Pavon to manipulate the price of CEL. In addition to this, he also broke US security law by failing to register Celsius as a “securities and commodities” dealer.

When I interviewed Celsius Founder Alex Mashinsky in 2021 about his crypto business, he tried to downplay the risks he was taking with customer funds.

I read his terms of service to him. And he still tried to say it wasn’t true. Now, he’s been arrested and charged with fraud. pic.twitter.com/V4pP95fL26

— Zack Guzmán (@zGuz) July 13, 2023

According to the Financial Times, Mashinsky even made a false claim that Celsius has 1 million active users. The maker does it to land on the list of the top crypto savings accounts.

Mashinsky Pleaded Not Guilty

Mashinsky is currently charged with securities fraud, wire fraud, market manipulation, conspiracy to manipulate the price of CEL, commodities fraud, and fraudulent schemes to manipulate customers.

Despite the charges and pieces of evidence piling up against him, Mashinsky has pleaded not guilty. As per his lawyer, Mashinsky called the charges “baseless,” and he looks forward to “vigorously defending himself in court”.

Related 

1. Details on Federal Charges Brought Against The Founder of Celsius, Alex Mashinsky
2. Mahinsky – The Man behind Celsius

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