NEW YORK - The US Securities and Exchange Commission Thursday charged the co-founder and former CEO of Celsius Network Ltd, as well as the cryptocurrency lending company itself with fraud, reported UPI.
New Jersey-based Celsius and co-founder Alex Mashinsky are charged with operating an unregistered exchange, as well as violating anti-fraud provisions of the federal securities laws, the SEC complaint states.
Also Thursday, the US Attorney's Office for the Southern District of New York announced it was unsealing an indictment against Mashinsky and other Celsius executives. They are charged with manipulating the market for the Celsius crypto token.
Mashinsky and former Chief Revenue Officer Roni Cohen-Pavon are also both charged with conspiracy, securities fraud, market manipulation, and wire fraud. Mashinsky was arrested Thursday and taken into custody.
Over the course of the past year, we have worked quickly to get to the bottom of what led to Celsius' collapse and to understand how a platform that advertised itself as the 'safest place for your crypto' could have left investors holding billions of dollars in losses, US Attorney Damian Williams said in a statement.
Today we have the answer. Today I am announcing the unsealing of an indictment charging Celsius's founder and CEO, Alex Mashinsky, with orchestrating a scheme to defraud customers of Celsius through a series of false claims about the fundamental safety and security of the Celsius platform, and for participating in a scheme... to inflate the price of Celsius's proprietary token, CEL.
In a parallel investigation, the Federal Trade Commission announced Thursday it had reached a settlement deal with Celsius. The US$4.7 billion judgment is being set aside while Celsius focuses on bankruptcy hearings and paying back customers.
The company also pledged to cooperate with ongoing FTC, SEC, and state and federal investigations.
Celsius filed for bankruptcy protection exactly one year ago with a US$1.19 billion deficit. Mashinsky was already being sued by the New York Attorney General.
Thursday's SEC filing contends Mashinsky knowingly concealed the company's financial failings by making false or misleading statements, as investors continued to pour money into Celsius.
The financial firm managed around US$25 billion of assets at its peak.
Celsius lied to investors by presenting itself as a safe investment opportunity and a chance to gain financial freedom, but, behind the scenes, the company operated a failing business model and took significant risks with investors' crypto assets, SEC Enforcement Division Director Gurbir S. Grewal, said in a statement.
Thousands of retail investors have experienced significant financial hardship as a result of Celsius' and Mashinsky's illegal conduct, and today we are holding Celsius and Mashinsky responsible for defrauding thousands of retail investors.
Celsius is the latest in a string of recent failures in the crypto sector.
In June, the SEC charged cryptocurrency trader Binance and its founder with security law violations, including deceiving customers and operating an unregistered exchange.
A day later, the SEC submitted a complaint against digital currency firm Coinbase, accusing it of operating an unauthorised cryptocurrency exchange. - Bernama