Celsius and Alex Mashinsky face slew of criminal, regulatory allegations

Alex Mashinsky and the company he founded and led face a battery of fraud-related accusations after criminal and civil charges were brought against the former Celsius CEO, and the company was named as co-defendant in civil enforcement cases brought by U.S. regulators. 

The former CEO of the bankrupt crypto lender Celsius was charged by federal prosecutors in an indictment made public on Thursday, with allegations of multiple schemes to defraud his customers. 

The indictment and filings by federal regulators allege that Mashinsky and the company pumped the price of Celsius’s native token using customer assets and repeatedly misled their customers. The Securities and Exchange Commission, Federal Trade Commission and Commodity Futures Trading Commission also took their own civil enforcement actions against Mashinsky and the company.

“In sum and substance, Mashinsky portrayed Celsius as a modem-day bank, where customers could safely deposit crypto assets and earn interest," prosecutors said in their indictment of the embattled former CEO and Roni Cohen-Pavon, the company's chief revenue officer. 

"In truth, however, Mashinsky operated Celsius as a risky investment fund, taking in customer money under false and misleading pretenses and turning customers into unwitting investors in a business far riskier and far less profitable than what Mashinsky had represented," they continued.

Celsius settles with the FTC

Celsius itself settled with the FTC for $4.7 billion, though because of the company's ongoing bankruptcy, the FTC agreed to suspend the payment to allow Celsius to maximize return of its remaining assets to customers. Mashinsky and co-founders Shlomi Daniel Leon and Hanoch “Nuke” Goldstein” did not, meaning the agency will press forward with a civil case against them in court. 

“While lying to their customers to keep them from withdrawing their cryptocurrency deposits, Leon, Goldstein, and Mashinsky protected themselves by withdrawing significant sums of cryptocurrency from Celsius two months before the company filed for bankruptcy,” the FTC said in a statement. “Consumers subsequently lost access to their life savings, college funds, and money saved for retirement.”

The SEC and CFTC enforcement actions remain open despite the company's settlement with the FTC. 

Prosecutors and regulators said Mashinsky “made so many false and misleading statements” in live internet broadcasts that employees began reviewing the videos after they aired, at some points editing out “misrepresentations” after repeatedly warning Mashinsky that what he said wasn't true. 

Mashinsky and the company are also accused of lying to customers and conducting business operations that contributed to the company's failure, including the issuance of over $1 billion in unsecured business loans despite public statements by Mashinsky to the contrary.