The U.S. Securities and Exchange Commission (SEC) has taken legal action against Alex Mashinsky, the former CEO of Celsius, and the company itself, accusing them of engaging in unregistered and fraudulent activities to raise billions of dollars. Additionally, the SEC claims that they sold “crypto asset securities” in violation of regulations.
In the complaint filed by the SEC, it is alleged that Mashinsky made false promises to investors regarding the safety of their investments through Celsius’ lending service, known as the “Earn Interest Program.” Furthermore, both Celsius and Mashinsky are accused of manipulating the price of Celsius’ own crypto asset security, the Celsius token.
The securities regulator has specifically accused Celsius and Mashinsky of publicly misrepresenting significant financial events and the financial condition of the company. According to the SEC, these misrepresentations occurred as early as March 2018 when the CEL initial coin offering took place and continued until just days before Celsius halted customer withdrawals from its platform.
In connection with the investigation into the collapse of the lending company, Mashinsky was reportedly arrested on Thursday morning. The arrest follows a thorough probe into the company’s operations.
The SEC’s lawsuit follows the findings of the Commodity Futures Trading Commission (CFTC), which revealed that Celsius and Mashinsky had violated multiple U.S. regulations prior to the company’s downfall last year. This recent legal action by the SEC reinforces the regulatory scrutiny faced by Celsius and its former CEO.
Earlier this month, Bloomberg reported that attorneys from the CFTC’s enforcement division discovered that the lending company had misled investors and failed to register with the regulatory body. Furthermore, it was found that Mashinsky had violated several U.S. regulations.
The allegations against the lending company and its former CEO are significant and point to potential misconduct in the crypto industry. As regulatory bodies intensify their efforts to protect investors and maintain market integrity, the outcome of this lawsuit will be closely monitored by market participants and industry observers alike.
Celsius Initiates Voluntary Chapter 11 Proceedings
In a surprising turn of events, the lending company announced its decision to initiate voluntary Chapter 11 proceedings on the same day its founder and former CEO, Alex Mashinsky, was arrested. The company stated that it currently holds $167 million in cash, which will be utilized to support essential operations during the restructuring process.
The announcement emphasized the significance of this decision for both the community and the company. Mashinsky expressed confidence in the capability of the experienced team leading Celsius through this challenging phase.
Notably, Mashinsky’s arrest follows a lawsuit filed against him by New York Attorney General Letitia James back in January 2023. The complaint lodged against the founder alleged that he had made multiple “false and misleading statements,” resulting in substantial financial losses for investors amounting to billions.
