Federal prosecutors revealed seven accusations against ex-Celsius CEO Alex Mashinsky and Roni Cohen-Pavon, a chief executive, claiming deception and securities tampering.The SEC declared simultaneous accusations against Mashinsky and the bankrupt cryptocurrency exchange.The FTC also declared a $4.7 billion resolution against the exchange, which won't be paid until creditors and financiers are reimbursed in bankruptcy proceedings.
Alex Mashinsky, former CEO of Celsius, was arrested on Thursday on federal securities fraud charges, according to a source informing CNBC. The now-bankrupt cryptocurrency exchange was also liable for a $4.7 billion settlement per the SEC and CFTC due to allegations of deceiving investors out of billions of dollars. This outstanding settlement is one of the largest in FTC history, a near-record only second to Meta's $5 billion fine from 2019. In a NYC Federal court, Mashinsky pleaded not guilty against numerous fraud charges including securities, commodities, wire fraud and certain securities manipulation allegations. If convicted, Mashinsky and his associate, Roni Cohen-Pavon, could face extended prison time. Prosecutors have stated that Mashinsky had misrepresented the security of yield generating activities, the profitability of the company, the sustainability of its high rewards rates, and the risks associated with customers' cryptocurrency deposits.
The FTC declared that the company in question must return customer assets before the settlement is paid out. This news comes as the SEC charges both Mashinsky and Celsius for allegedly misleading investors and manipulating the price of their exchange token, CEL. The SEC confirmed that none of these accusations, which included falsely claiming Celsius had not engaged in risky trading practices and paid back most of their revenue to investors, were true. They also stated that Celsius had suffered "hundreds of millions of dollars" worth of defaults on their institutional loans, classifying their exchange token as a security. This matter has been a contentious issue in the crypto space this year. In response to the allegations, Mashinsky's lawyer declared he would be defending the charges in court, calling them baseless. This follows earlier accusations by New York prosecutors of a $20 billion fraud against investors, of which CNBC has previously reported on.
Jim Forkin from CNBC provided input for this report.
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