Alex Mashinsky, the founder and former CEO of Celsius Network, is in police custody following his arrest on Thursday. Mahinsky faces multiple fraud charges, joining a growing list of former crypto CEOs in trouble with the law – including Sam Bankman-Fried (FTX) and Do Kwon (Terra/Luna).
The charges emerged after Celsius Network’s collapse which caused significant upheaval in the crypto industry. Celsius Network, once boasting an impressive $30 billion in assets, faces numerous legal battles, including allegations of investor deception and securities fraud.
Celsius Network founder arrested, charged with fraud, US prosecutor says https://t.co/D0No6z5Ej0 pic.twitter.com/W3JsnbWNEl
— Reuters (@Reuters) July 13, 2023
Mashinsky’s arrest illustrates the need for more stringent regulatory scrutiny and transparency within crypto.
CFTC findings and SEC lawsuit expose violations and manipulation
The Commodity Futures Trading Commission (CFTC) has concluded that Celsius Network, under the leadership of Alex Mashinsky, violated U.S. regulations before its bankruptcy. The CFTC alleges that Celsius misled investors and should have registered with the agency, adding to the growing list of charges against the company.
Additionally, the Securities and Exchange Commission (SEC) has filed a lawsuit, accusing Celsius and Mashinsky of manipulating the price of their native token, CEL, and raising billions through fraudulent, unregistered sales of “crypto asset securities.”
Celsius Network’s downfall can be attributed to risky bets made with customer funds. The company failed to disclose the extent of its market-making activities. A court-ordered bankruptcy examiner’s report reveals that Celsius masked the true nature of the business.
Former Celsius CEO Alex Mashinsky sold all 90,000 $CEL for 48,018 $USDC on Feb 11, then deposited all 48,018 $USDC to #Coinbase.
Currently, 9 wallets of Alex Mashinsky only hold ~$5K in assets.https://t.co/kzWBm4NYtT pic.twitter.com/MMkNJJ34eN
— Lookonchain (@lookonchain) July 13, 2023
Mashinsky’s claim that the crypto products offered by Celsius were not securities or commodities has not found favor with regulatory authorities.
The arrest of Mashinsky highlights the urgency for better regulatory oversight and investor safeguards within the crypto sector. Allegations of fraud, securities manipulation, and investor deception underscore the risks inherent to the sector.
Pleading innocence amid market chaos
Mashinsky has pleaded not guilty to the U.S. fraud charges accusing him of misleading customers and artificially inflating the value of his company’s crypto token.
Alex Mashinsky, founder and former CEO of bankrupt cryptocurrency lender Celsius Network, pleaded not guilty to US fraud charges that he misled customers and artificially inflated the value of his company's propriety crypto token https://t.co/i9mZ2ZuiQq pic.twitter.com/djjS9b7iYR
— Reuters (@Reuters) July 14, 2023
Mashinsky, aged 57, faced the indictment without handcuffs, looking casual in a grey polo shirt and jeans. As the industry reckons with the collapse of several companies, including the exchange giant FTX, Mashinsky’s plea adds another layer to the ongoing saga.
There is a glimmer of optimism despite the widespread despair in the market. An influential verdict from a New York judge found no federal securities law violations by Ripple Labs. Consequently, this victory has ignited a rally in the cryptocurrency’s value, offering a glimmer of hope amidst the darkness.
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