On Air Now

DuBois Weather

Founder of cryptocurrency lending platform Celsius Network arrested

SHARE NOW

(NEW YORK) — The founder of cryptocurrency lending platform Celsius Network was arrested Thursday on federal charges.

Alexander Mashinsky founded Celsius in 2018 and positioned it as a stable, safe alternative to traditional financial institutions that would provide investors who held crypto assets financial freedom and economic opportunity.

Instead, federal prosecutors alleged he was misrepresenting the company’s financial health before it collapsed into bankruptcy a year ago.

The Securities and Exchange Commission and the Federal Trade Commission filed companion lawsuits Thursday that said Mashinsky and Celsius “falsely promised investors a safe investment with high returns” but misled investors about the financial success of Celsius’ business and the price of Celsius’ own crypto asset security was fraudulently manipulated.

“Defendants also falsely claimed that Celsius had 1 million active users on Celsius’s platform. It did not. Celsius’s own internal data—which was regularly shared with Mashinsky — showed that the company only had approximately 500,000 users who had ever deposited crypto assets on the company’s platform and that many were no longer active users,” the SEC lawsuit said.

The alleged scheme unraveled in June 2022, leaving investors unable to withdraw billions of dollars in crypto assets from Celsius’ online platform. Celsius filed for bankruptcy a month later.

“By 2022, Celsius’ business was unsustainable, and it became clear internally that the company would fail. One employee called Celsius a ‘sinking ship,’ while another wrote that ‘there is no hope … there is no plan’ and that Celsius’s business model ‘is fundamentally broken.’ On May 21, 2022, a Celsius executive candidly acknowledged in an internal message: ‘We don’t have any profitable services,"” the lawsuit said.

According to the regulators, Celsius told the public a different story: “That [a]ll user funds are safe, and that it continue[s] to be open for business as usual.”

Copyright © 2023, ABC Audio. All rights reserved.