In a surprising turn of events, Alex Mashinsky, the former CEO of Celsius Network, was arrested today on allegations of fraud and misconduct. The arrest follows an extensive investigation by financial regulatory authorities and law enforcement agencies.
Alex Mashinsky was taken into custody on the morning of July 13, 2023, just minutes after the United States Securities and Exchange Commission (SEC) filed a lawsuit against the now-bankrupt crypto lender.
According to reports, Mashinsky’s arrest is linked to an investigation into the collapse of Celsius Network, which filed for bankruptcy on July 14, 2022. Investigators from the Commodity Futures Trading Commission (CFTC) found Mashinsky to be in violation of several U.S. regulations leading up to the company’s implosion in 2022.
The troubles for Celsius and its former CEO began in June 2022 when the cryptocurrency lender suddenly halted withdrawals on its platform, causing significant alarm among investors. Subsequently, on June 16, 2022, securities regulators from five US states initiated an inquiry into Celsius. A month later, the platform filed for bankruptcy.
On January 5, the New York Attorney General (NYAG) lodged a complaint against Mashinsky, alleging that he had deceived investors and caused billions of dollars in losses. This legal action gave momentum to the investigation into Celsius as an illicit cryptocurrency lender.
SEC lawsuit against Celsius and Alex Mashinsky
On July 13, 2023, the Securities and Exchange Commission (SEC) filed a complaint against Celsius Network Limited and its founder and CEO, Alexander “Alex” Mashinsky.
According to the SEC, from March 2018 to June 2022, Celsius and Mashinsky allegedly conducted unregistered and fraudulent offers and sales of crypto asset securities, resulting in billions of dollars raised from investors.
The complaint states that they made false promises to investors through their “Earn Interest Program,” misleading them about the financial success of Celsius’s business. Additionally, they manipulated the price of Celsius’s own crypto asset security, the “CEL” token. As a result, when the scheme collapsed in June 2022, investors were unable to withdraw billions of dollars in crypto assets, leading to Celsius’s bankruptcy.
According to the SEC, the defendants have violated multiple sections of the Securities Act and the Exchange Act. As a result, the SEC is seeking injunctions, civil penalties, disgorgement of ill-gotten gains, and other remedies.
Mashinsky’s arrest is a significant development in the ongoing efforts of regulatory authorities to hold individuals and companies accountable in the cryptocurrency space. This comes after the SEC’s recent lawsuits against prominent crypto exchanges like Binance and Coinbase, highlighting the increased scrutiny and enforcement actions by regulatory bodies. As the investigation continues, authorities will strive to uncover the full extent of the alleged wrongdoing and ensure justice for those affected.
