The U.S. Department of Justice (DOJ), U.S. Securities and Exchange Commission (SEC), and U.S. Commodity Futures Trading Commission (CFTC) have all filed lawsuits against former Celsius Network Chief Executive and co-founder Alex Mashinsky and ex-chief revenue officer Roni Cohen-Pavon, charging them with fraud. The Federal Trade Commission (FTC) also announced a settlement with Celsius, which will “permanently ban it from handling consumers’ assets.”
The DOJ charged Mashinsky on seven counts, including securities, commodities, and wire fraud, and several conspiracy-related allegations. The FTC alleged that Celsius misrepresented itself as a kind of “neo-bank” and made material misrepresentations to customers. The CFTC accused Mashinsky of lying to media sources about the company’s initial coin offering (ICO), claiming it raised $50 million when it actually raised $32 million.
Celsius was funded almost entirely by customer deposits, which it gambled and lost, racking up an over billion-dollar deficit by the time it filed for bankruptcy in July 2022. Mashinsky had promised customers 18% yields on deposits, but the FTC alleged most users received far less than that.
Mashinsky had also claimed that customers would keep legal ownership over the crypto they deposited, but the FTC alleged that Celsius pooled all its customers’ funds in an “omnibus account,” which was treated as a slush fund.
“At almost no point was [Celsius] a functioning business,” the complaints show. “At the very center of its business was a fraud: Celsius executives were making unsecured loans using customer funds and lying about it.”