On Thursday morning, several lawsuits were filed against the now-bankrupt cryptocurrency lending company Celsius Network and its former CEO and co-founder Alex Mashinsky by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC).
According to a person familiar with the situation, Alex Mashinsky, co-founder and former CEO of Celsius, was detained today and charged with fraud, according to Bloomberg.
According to a previously sealed indictment, Mashinsky and Roni Cohen-Pavon, Celsius’ chief revenue officer, were accused by the U.S. District Court for the Southern District of New York on Tuesday for allegedly executing a “scheme to defraud customers of Celsius Network.”
Through “unregistered and fraudulent offers and sales of crypto asset securities,” the business and Mashinsky allegedly raised billions of dollars from investors.
They “falsely promised investors a safe investment with high returns” through their Earn Interest Program, which claimed customers could earn up to 18% in interest annually.
Along with its recent assertion in other papers that a variety of cryptocurrencies like BNB, BUSD, SOL, ADA and MATIC are securities, the SEC also claimed that Celsius’ token CEL and its former Earn Interest Program are securities.
In June 2022, a month after freezing customer assets amid market volatility that resulted in the failure of other crypto businesses, Celsius filed for bankruptcy. According to the SEC lawsuit, a Celsius executive stated in an internal mail on May 21, 2022, “we don’t have any profitable services,” just a few weeks before declaring bankruptcy.
In a Chapter 11 bankruptcy filing in federal court in New York, the startup with its headquarters in New Jersey, which had once been valued at $3.25 billion when it increased the size of its “oversubscribed” Series B financing round to $750 million in November 2021, claimed to have between $1 billion and $10 billion in assets and liabilities as well as more than 100,000 creditors.
A group known as Fahrenheit stated in May that it had acquired the assets of Celsius. The group of bidders comprises US Bitcoin Corp., Proof Group, Steven Kokinos, and Ravi Kaza, and is headed by investment firm Arrington Capital.
Michael Arrington, the creator of TechCrunch, serves as the CEO of Arrington Capital, as the name would imply. In 2011, Michael Arrington departed TechCrunch.
The goal of the group is to divide the liquid assets of Celsius to the account holders. A new management group will be in charge of overseeing the company’s illiquid assets, including its institutional loan portfolio, mining operation, and alternative investment portfolio.