- Alex Mashinsky and Roni Cohen-Pavon, former executives of the collapsed Celsius crypto lending firm, have been arrested on securities fraud charges, accused of artificially inflating the price of the company’s token, CEL.
- Alongside the DOJ’s charges, three federal agencies have lodged complaints against Celsius and Mashinsky for fraud, leading to a proposed $4.7 billion settlement for their alleged deceitful acts.
In a significant development in the crypto world, former Celsius CEO Alex Mashinsky and the firm’s Chief Revenue Officer, Roni Cohen-Pavon, have been apprehended for alleged securities fraud. As per Bloomberg, the duo stands accused by the Justice Department of artificially inflating Celsius’ crypto token, CEL, while simultaneously deceiving the company’s customers about the token, their activities, and the overall health of the firm.
The DOJ alleges that Mashinsky and Cohen-Pavon orchestrated an illegal manipulation of CEL’s price, inducing investors to purchase the token at inflated prices. Notably, the DOJ alleges Mashinsky and Cohen-Pavon profited immensely, raking in $42 million and $3.6 million, respectively, from their token sales, even as Mashinsky assured Celsius customers that he wasn’t offloading his holdings.
A revealing October 2021 WhatsApp exchange, highlighted by the DOJ, indicates Cohen-Pavon’s admission to Mashinsky that CEL’s value was artificially maintained by Celsius spending millions weekly, with new users failing to stabilize the price.
Mashinsky and Cohen-Pavon are also accused of promoting Celsius as a safe haven for customers to store their crypto assets and earn interest. Contrarily, the DOJ alleges Mashinsky used Celsius as a high-risk investment fund, acquiring customer money under false and misleading pretexts.
The fallout doesn’t end here. Celsius, along with Mashinsky, also faces accusations from three federal agencies: the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the FTC. Each agency accuses the company and its former CEO of fraud.
Further complications arise from a proposed settlement between the FTC and Celsius, where the company stands accused of deceptive practices, resulting in a hefty $4.7 billion fine. This settlement also holds Mashinsky and two former executives accountable for misleading consumers about the safety and accessibility of their assets, consequently banning the company from managing customer assets.
“Celsius touted a new business model but engaged in an old-fashioned swindle,” Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, noted in a statement. He emphasized that the developments are a clear message that emerging technologies are not immune to the law.
Celsius, previously one of the largest crypto lenders, faced considerable difficulties last year and filed for Chapter 11 bankruptcy. The company’s Chief Financial Officer, Yaron Shalem, was arrested in 2021 in Israel amidst accusations of Celsius operating as a Ponzi scheme.
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