The problems keep mounting for Celsius founder Alex Mashinsky, as he’s been arrested and charged by federal authorities with fraud. Mashinsky faces seven criminal counts, including securities, commodities and wire fraud, He and his company are being independent sued by three government agencies — the FTC, CFTC and SEC. The U.S. Attorney’s Office alleges that Mashinsky misled customers regarding the nature of his company, making it seem like a bank when it was actually a high-risk investment fund.
Celsius’s former chief revenue officer, Roni Cohen-Pavon, was also arrested, with both Pavon and Mashinsky being charged with manipulating the price of the company’s proprietary crypto token so they could sell their own stock at inflated prices.
“Mashinsky misrepresented, among other things, the safety of Celsius’s yield-generating activities, Celsius’s profitability, the long-term sustainability of Celsius’ high rewards rates and the risks associated with depositing crypto assets with Celsius,” federal prosecutors obtained by CNBC.
Additionally, the FTC reached a $4.7 billion settlement today with Celsius, which nearly matches the record fines for violating the privacy of consumers. The company has agreed to these financial terms, but will only make payments once it returns what remains in customer assets as part of ongoing bankruptcy proceedings.
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This all follows a New York-based lawsuit issued in January that also alleged massive fraud. That suit seeks appropriate damages after Celsius allegedly defrauded investors out of “billions of dollars” in cryptocurrency.
While details are scant on today’s arrest, the New York suit alleges that Mashinsky misled customers about the company’s worsening financial health and failed to register as a commodities and securities dealer, among many other allegations. New York State Attorney General Letitia James alleged that Mashinsky deceived hundreds of thousands of investors, with over 26,000 of them located in New York.
If convicted on all counts, Mashinsky and Pavon face decades in prison. Mashinsky resigned as CEO of Celsius last year and is no longer involved with the company.
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