In a series of unfortunate events, the former CEO of the onetime crypto lending powerhouse Celsius Network Ltd., Alex Mashinsky, has found himself embroiled in a quagmire of legal woes. These charges, led by the U.S. Department of Justice (DoJ), have been bolstered by a plethora of lawsuits and allegations from U.S authoritative bodies such as the U.S Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC).
In the heat of January 2023, New York Attorney General Letitia James set the stage by launching prosecution against Mashinsky asserting that he had concocted a far-fetched narrative about the company’s financial health before declaring bankruptcy. However, standing his ground, Mashinsky vehemently parried these allegations, chastising them as ungrounded and products of online misinformation.
The onslaught of accusations does not stop there, with the DoJ broadening the lens to accuse Mashinsky and accomplices of engaging in a lengthy deceptive escapade that misrepresented the company’s market value and their vested interest in CEL. The DoJ’s bone of contention lies with their claim that Celsius, rather than being a “modern-day bank” that it was marketed as, was instead a volatile and misleading investment vessel.
Echoing the DoJ’s concerns, the SEC soon announced its lawsuit against the company and its founder, alleging securities fraud, and leveling charges that questioned the nature of Celsius’s products as securities. With its teasingly high-interest rates and promises of “substantial returns”, the SEC posits that these offerings were bound by the same legal requirements set upon securities offerings – a submission of a registration statement to the SEC for approval.
Despite these allegations, it is worthy of mentioning that throughout its operation, Celsius never once declared these offerings as securities. It is this clear discrepancy between the SEC’s allegations and Celsius’s operations that has stirred up the controversy surrounding the nature of Celsius’s products; Are they securities or not?
Another major issue arising from these strings of allegations carries a bleak concern for the safety of customers’ digital investments. The CFTC leveled accusations of a misleading scheme that blindfolded customers about the safety of their investments. Despite apparent worsening market conditions, Celsius religiously promoted its stability while allegedly concealing losses from clients.
A settlement was reached with the FTC banning the company and its associates from offering similar products or services, and culminated in a judgment of a staggering $4.7 billion, which has been temporarily suspended for Celsius to return assets to its devastated consumers.
The FTC also charged three former executives, including Mashinsky, for alleged deceptive practices leading to consumers relocating their cryptocurrencies to the platform. The executives are yet to concur with the settlement, leading to the case being dragged into federal court.
Source: Cryptonews
