In a major development, Alexander Mashinsky, the founder and former CEO of Celsius Network (CRYPTO: CEL), has been arrested on charges of securities fraud, commodities fraud and wire fraud.
What Happened: The charges, brought forth by the United States Attorney for the Southern District of New York and the FBI, allege that Mashinsky and Roni Cohen-Pavon, the former chief revenue officer of Celsius, manipulated the market for Celsius's proprietary CEL crypto token while defrauding customers and misleading them about the company's success, profitability and investment nature.
Why It's Important: The indictment comes a year after Celsius Network, a crypto platform that managed approximately $25 billion in customer assets, filed for bankruptcy protection.
Lawsuits have been lodged against the cryptocurrency firm by the Securities and Exchange Commission, the Federal Trade Commission, and the Commodity Futures Trading Commission, accusing the company of deceiving investors. Following an investigation into the company's downfall, it's reported the founder, Mashinsky, has been taken into custody.
The platform, which had advertised itself as the "safest place for your crypto," left investors with billions of dollars in losses.
The indictment by the Justice Department further alleges that Mashinsky and Cohen-Pavon artificially inflated the price of CEL through illicit market manipulation, secretly selling their own CEL tokens at inflated prices.
This manipulation allowed Mashinsky and other Celsius executives to sell their own CEL holdings for a substantial profit, with Mashinsky reaping approximately $42 million in proceeds from his sales of CEL, the indictment said.
In the lead-up to June 12, 2022, the pause of Celsius customer withdrawals, Mashinsky continued to assure Celsius customers that Celsius was in a strong financial position and had sufficient liquidity to meet all customer withdrawal demands, the Justice Department said. Yet Mashinsky is accused of removing approximately $8 million of his own, non-CEL crypto assets from the Celsius platform.
Also Read: Major Victory For Ripple: XRP Sales Not Classified As Investment Contracts, Judge Rules
The United States has entered into a non-prosecution agreement with Celsius, which has agreed to accept responsibility for its role in the fraudulent schemes.
The agreement takes into account Celsius's ongoing Chapter 11 bankruptcy proceedings and its efforts to maximize recovery for victims in connection with the bankruptcy.
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