The latest in a series of legal actions related to the crypto industry in recent weeks, Alex Mashinsky, the co-founder and former CEO of the now-bankrupt cryptocurrency lending platform Celsius, was taken into custody on Thursday. Bloomberg reported. The development follows an extensive investigation into the company’s abrupt demise, a source familiar with the situation said.
The US Securities and Exchange Commission (SEC) has charged both Celsius Network and Mashinsky with securities fraud. This lawsuit was quickly followed by lawsuits from the Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC).
“From March 2018 through June 2022, Defendants Celsius Network Limited and its founder and CEO Alexander Mashinsky raised billions of dollars from investors through unrecorded and fraudulent offers and sales of crypto assets,” the SEC legal filing reads. “Defendants falsely promised investors a safe, high-yield investment through the Earn Interest Program, misled investors about the financial success of Celsius’ company, and fraudulently manipulated the price of Celsius’ proprietary crypto asset security — the so-called ‘CELL’. sign.”
The SEC complaint alleges that the Celsius Network token, CEL, and the Earn Interest Program are securities. The complaint reads: “In this case, Celsius offered and sold CEL and the Earn Interest Program as securities […] Celsius and Mashinsky have never filed or had one in effect with the SEC for their offerings and sales of securities through the Earn Interest Program.”
A done deal
Reports emerged earlier this month suggesting that Mashinsky and Celsius Network could face legal action by the CFTC. That body’s investigators reportedly concluded that the defunct lender and its CEO violated regulatory rules by providing misleading information to investors.
Celsius Network was declared bankrupt in July last year. Subsequently, the crypto consortium Fahrenheit emerged as the successful bidder for the company’s assets.
New York Attorney General Letitia James had previously filed a lawsuit against Mashinsky, alleging he misled investors about the company’s financial health.
Mashinsky’s arrest and legal action against Celsius Network underline the increasing regulatory scrutiny the cryptocurrency industry faces. As the industry continues to grow and mature, navigating regulatory compliance will be a key factor in the success and longevity of crypto platforms and services. However, some believe that the strict nature of the SEC’s regulatory approach is driving crypto innovation out of the US
