Former CEO of Celsius Network, Alex Mashinsky, along with ex-chief revenue officer Roni Cohen-Pavon are facing legal charges pressed by various US agencies, including the Department of Justice (DOJ), Securities and Exchange Commission, and Commodity Futures Trading Commission. The claims say Mashinsky utilized a campaign of deception that likened the defunct crypto lending platform to traditional banking facilities. The allegations are extensive and severe, such as fraud, misleading investors, and violations of financial regulations. They highlight the complex plausibility of combining traditional financial models with blockchain technology.
Due to this controversy, the Federal Trade Commission (FTC) charged Celsius with several offenses resulting in an astonishing $4.7 billion settlement. Still, Mashinsky and other former executives decided not to agree to it. Starting in 2017, Celsius Network crashed hard after practicing dangerous financial tactics, leading to filing for bankruptcy with a deficit of over a billion dollars.
Celsius Network’s marketing portrayed itself as a new age financial institution. But this was very far from its reality. Instead of giving users legal ownership over deposited crypto, the company pooled all its funds into one large slush fund. Furthermore, while Celsius reassured customers they could withdraw anytime, the reality was often days of waiting. The hefty yields and financial security promised to clients were merely a sophisticated scam to retain assets and attract new investors.
Doubts about Celsius’s financial losses and poor record-keeping were raised as early as 2019. Regardless of the mounting inconsistencies and financial missteps, Mashinsky, Leon, and Goldstein made millions. Market crashes, such as algorithmic stablecoin UST, exposed these reckless actions through the heavily dilapidated organization. While deposits remained open for Celsius, withdrawals were halted, and the executives couldn’t resist saving themselves first, adding to the mounting allegation pile.
It’s crucial to ask whether Mashinsky truly believed in the dream that he could revolutionize traditional banking structures with his blockchain methods. Was this merely a desperate company attempting to ‘fake it till they make it’ through expansion and lucky trades? It’s a daunting lesson to those ambitious enough to recreate banking. Be sure of the foundation upon which you build your financial empire to prevent a house of cards such as Celsius from collapsing once again.
Source: Coindesk
