Alexander Mashinsky, the founder and former CEO of the cryptocurrency lending platform Celsius Network, has been arrested on federal fraud charges. The charges allege that Mashinsky misled customers about key aspects of his business in order to defraud them. He is specifically charged with securities, commodities, and wire fraud, as well as illegally manipulating the price of Celsius's proprietary crypto token.
According to the indictment, Mashinsky marketed Celsius to customers as a safe and modern-day bank where they could deposit crypto assets and earn interest. However, the indictment claims that Mashinsky operated Celsius more like a risky investment fund, taking in customer money under false pretenses and exposing them to high-risk ventures.
Mashinsky allegedly promoted Celsius through various channels, including media interviews, his Twitter account, and Celsius's website. The indictment also mentions a weekly "Ask Mashinsky Anything" session that was broadcast on Celsius's website and YouTube channel.
Employees at Celsius reportedly noticed false and misleading statements in these sessions and warned Mashinsky, but their concerns were ignored.
As a result of Mashinsky's false portrayal of Celsius as a secure institution, the platform's customer base grew significantly, attracting a large number of retail investors. By the fall of 2021, Celsius had allegedly amassed approximately $25 billion in assets, making it one of the largest crypto platforms globally.
In addition to the criminal charges, the Securities and Exchange Commission (SEC) has also sued Mashinsky and Celsius, accusing them of misleading investors through unregistered and fraudulent offers and sales of crypto asset securities.
This is not the first legal action against Mashinsky and Celsius. In January, the New York Attorney General, Letitia James, filed a lawsuit against Mashinsky, accusing him of misleading hundreds of thousands of investors. Celsius filed for bankruptcy last year.
Mashinsky's attorney has not yet responded to the charges. The case will now proceed in Manhattan federal court.