Bankrupt Crypto Lender Celsius Sued by SEC and CFTC, Former CEO Arrested
Alex Mashinsky, the former CEO of bankrupt crypto lender Celsius, has been arrested, as he and his company faces lawsuits from U.S. financial regulators.
The lawsuits from the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) surround the crypto lender's allegedly misleading statements about the state of its business.
Mashinsky, 57, is accused of orchestrating a scheme to defraud customers of Celsius Network and its affiliated entities, as stated in the unsealed indictment. The SEC, the CFTC, and the FTC have all filed lawsuits against Mashinsky and the company. Mashinsky was arrested Thursday morning, Bloomberg reported.
Celsius was known for offering high interest rates on digital-asset deposits, but the crypto lender faced financial distress and filed for bankruptcy following the collapse of the TerraUSD stablecoin and a downturn in the crypto market in May 2022 that left it unable to meet customer withdrawals.
The SEC court filing said Celsius faced more than $800 million in losses in 2021 and roughly $165 million in losses in the first quarter of 2022. By May of 2022, one employee referred to Celsius as a «sinking ship» in internal discussions, while an unnamed executive bluntly stated, «We have no profitable services.»
Despite this troubling financial situation, the FTC suit claims Mashinsky and others continued to solicit new customers based on misleading claims of Celsius's financial stability, including a $750 million insurance policy for deposits.Similar accusations are made in the CFTC's complaint against Mashinsky and Celsius.
The FTC entered into a settlement with Celsius, permanently barring it from handling customer assets.
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