U.S. law enforcement authorities have recently arrested the bankrupt crypto lender Celsius Network's former CEO, Alex Mashinsky, with the charges of conducting fraud and attempting to manipulate the crypto market. The U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC) also simultaneously filed lawsuits against the firm and Mashinsky. Prosecutors claimed that the former CEO organized a scheme to defraud Celsius customers from 2018 to June 2022. - Celsius' chief revenue officer, Roni Cohen-Pavon, was similarly arrested by U.S. authorities.
- The SEC accused Mashinsky and Celsius of making misleading statements to encourage investors to invest in the firm's products and misrepresenting the company's financial condition to make it appear more profitable than it really was.
- Besides, the FTC fined Celsius $4.7B, permanently banning the company from offering, marketing, or promoting any product or service used to deposit, exchange, invest, or withdraw any assets.
- The increased scrutiny from the regulators came shortly after the investigators in the CFTC determined that Celsius and Mashinsky violated U.S. laws before the collapse by misleading investors and operating without registration.
- New York Attorney General Letitia James also previously claimed that Mashinsky made false statements about the declining financial condition of Celsius, misleading investors.
Celsius offered loans and paid high interest rates on crypto deposits. - The company filed for Chapter 11 bankruptcy protection in July 2022, mainly due to its liquidity issues and the crypto market downturn triggered by the multi-billion dollar Terra ecosystem's collapse that wiped over $60B off the industry.
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