U.S. prosecutors arrested Celsius’ former CEO Alex Mashinsky and former Chief Revenue Officer Roni Cohen-Pavon in New York on Thursday.
The U.S. Department of Justice (DOJ) charged the former executives with conspiracy to commit a multi-billion dollar fraud and market manipulation scheme in an indictment that was unsealed earlier today.
The indictment follows an investigation into Celsius, which entered a non-prosecution agreement with the authorities pursuant to the firm accepting its role in the fraudulent schemes alleged.
“Mashinsky portrayed Celsius as a modern-day bank, where customers could safely deposit crypto assets and earn interest. In truth, however, Mashinsky operated Celsius as a risky investment fund, taking in customer money under false and misleading pretenses,” read the indictment.
On the same day, the U.S. Commodities and Futures Trading Commission (CFTC), the U.S. Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) filed separate lawsuits against Celsius and Mashinsky.
The CFTC accused Celsius of engaging in increasingly risky investment strategies to meet the returns promised to investors, including extending millions of dollars worth of uncollateralized loans in unregulated DeFi agreements.
Meanwhile, the SEC alleged that Mashinsky and Celsius committed securities fraud through the issuance of its native CEL token and Celsius Earn product. In a Thursday press conference, the SEC’s Enforcement Director Gurbir Grewal claimed that the defendants had often misled investors by “completely fabricating their financials.”
The FTC took aim at Celsius for assuring customers it had adequate reserves to meet customer obligations, alleging that the firm violated the Federal Trade Commission Act in relation to its marketing and sale of crypto lending services.
The FTC’s complaint also charged former Celsius executives Shlomi Daniel Leon, Hanoch Goldstein and Mashinky with tricking customers into transferring crypto onto its platform. A few hours later, the FTC announced it had settled with Celsius, charging the company with a $4.7 billion fine which would be suspended until the firm’s bankruptcy proceedings conclude. However, the regulator said that the three executives had not agreed to a settlement and their case would proceed in federal court.
Mashinsky said he “vehemently denies the allegations brought today” and “looks forward to vigorously defending himself in court,” according to statements made by his lawyers to CoinDesk.