Ex-Celsius chief Alex Mashinsky has been arrested on fraud charges brought by three US regulators.
Federal prosecutors in New York have charged 57-year-old Mashinsky of manipulating cryptocurrency prices between 2018 and 2022.
He “orchestrated a scheme to defraud customers of Celsius Network and its related entities,” read the indictment.
Celsius was a major cryptocurrency lender offering high yields to customers.
The company collapsed in May 2022 due to the unsustainability of these yields, filing for bankruptcy in July.
US regulators the Securities and Exchange Commission (SEC), Federal Trade Commission and the Commodity Futures Trading Commission proceeded to file civil suits against Mashinsky.
Mashinsky and his company have been accused of issuing deceptive statements aimed at enticing investors to buy Celsius’ native CEL token and to invest in the Earn Interest Program, which claimed to offer returns as high as 17% on cryptocurrency deposits.
The SEC further alleged that Mashinsky misrepresented the financial performance of Celsius by exaggerating its profitability.
“Among other false representations, defendants misrepresented Celsius’s central business model and the risks to investors by claiming that Celsius did not make uncollateralised loans, the company did not engage in risky trading, and the interest paid to investors represented 80% of the company’s revenue,” said the SEC.
“None of these claims was true. Celsius could not consistently generate the revenue needed to make the required interest payments to investors with respect to the Earn Interest Program. The company engaged in risky trading practices and made uncollateralised loans to try to generate the necessary revenue, putting the entire Celsius enterprise at grave risk.
“Celsius was unsuccessful and, as a result, frequently paid much more than 80% of its revenue to satisfy the company’s interest payment obligations—a business practice that was hidden from investors, unsustainable, and ultimately led to the company’s collapse.”
Celsius’ collapse caused billions in losses for customers, most of which have yet to see compensation.