Celsius founder and CEO Alex Mashinsky arrested and charged with fraud; sued by the SEC
Alex Mashinsky, the founder and former CEO of the now-bankrupt crypto lending startup Celsius Network, was arrested and charged with fraud on Thursday morning by US authorities following a probe into the company’s collapse, Bloomberg reported.
In another report confirmed by Reuters, citing a reliable source and court filing, Mashinsky has also been sued by the U.S. Securities and Exchange Commission (SEC).
The SEC lawsuit claims that Mashinsky and Celsius Network raised billions of dollars by selling unregistered crypto asset securities. Furthermore, the allegations state that Mashinsky misled investors about the financial performance and success of his business.
The news of Mashinsky’s arrest comes exactly a year after the crypto lending startup filed for bankruptcy following the freezing of withdrawals for 1.7 million of its crypto customers.
In addition, Celsius Network faces another hurdle as it confronts a lawsuit from the U.S. Securities and Exchange Commission (SEC). This lawsuit adds to the company’s existing challenges, as earlier this year, it was also sued by the attorney general of New York.
These legal battles contribute to the overall uncertainty and instability in the crypto industry, especially following the recent SEC lawsuits against prominent crypto exchanges like Binance and Coinbase Global. The regulatory landscape poses significant risks for the sector, heightening concerns within the crypto community.
Celsius is one of the many startups with exposure to now bankrupt Three Arrows Capital (3AC). Others include BlockFi and Voyager Digital. As recently as March of this year, 3AC managed about $10 billion in assets, making it one of the largest crypto hedge funds in the world. Lawyers representing Three Arrows’ creditors say the firm’s founders Zhu Su and Kyle Davies have gone missing and their physical whereabouts are “currently unknown
Meanwhile, back in June, Celsius said it froze withdrawals, as well as transfers between accounts, “to stabilize liquidity and operations while we take steps to preserve and protect assets.”
“We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” the New Jersey-based company said.
Mashinsky, the CEO, was quoted in October last year saying Celsius had more than $25 billion in assets. The company’s website, which urges customers to “Earn high. Borrow low,” said it offers interest rates of up to 18.6%.
Founded in 2017 by Alex Mashinsky and S. Daniel Leon. It lets you earn interest on your crypto and instantly borrow against it. That startup has built the next generation of decentralized lending and borrowing products leveraging cryptocurrency. Celsius Network addresses the financial needs of today’s consumers worldwide through high-interest income and low-cost lending accessible via a mobile app.