The co-founder and former CEO of the defunct cryptocurrency exchange Celsius was arrested on fraud charges Thursday, Bloomberg reported.
Alex Mashinsky, 57, was also charged with attempting to manipulate cryptocurrency markets, per Bloomberg. The Department of Justice accused Mashinsky and Roni Cohen-Pavon, Celsius’ chief revenue officer, of a, “years long scheme to mislead customers,” according to Coindesk.
The Securities and Exchange Commission (SEC) sued the company and Mashinsky for securities fraud on the same day in the Southern District of New York, civil charges that would not carry the penalty of prison time. The Federal Trade Commission and the Commodity Futures Trading Commission likewise filed suit against the bankrupt company. Celsius, the SEC, and the Department of Justice did not immediately respond to requests for comment.
Celsius filed for bankruptcy in July 2022 amid the wider collapse of the cryptocurrency industry, owing some $4.7 billion to its users, without anywhere near the assets needed to pay them. A month earlier, it had stopped all withdrawals of customer assets, fomenting panic among its users. Fahrenheit, a consortium of crypto companies and investors, won a bid to acquire Celsius’ assets in May.
An independent investigator’s report issued in January 2023 found that Celsius had used both customer funds and investors’ cash to keep the price of the exchange’s native token CEL artificially high. Mashinsky himself sold $68.7 million worth of the token. Celsius executives, including Mashinsky and his wife, had cashed out in advance of the company’s implosion, according to court filings. Mashinsky withdrew over $10 million before the company halted withdrawals, and his wife Kristine took out $2 million, per the filings.
In January 2023, New York’s attorney general filed suit against the company and Mashinsky, alleging both misled and defrauded investors. The AG is seeking to ban them from doing business in the state. Some 40 states are investigating whether Celsius was little more than a Ponzi scheme.
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