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HomeExchange NewsFormer Head of Crypto Firm Celsius Arrested on Federal Charges

Former Head of Crypto Firm Celsius Arrested on Federal Charges

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Alexander Mashinsky – the founder of bankrupt crypto lending platform Celsius – has been arrested and indicted on federal charges.

Former Celsius Head Taken into Custody

Celsius was founded in 2018. Things fell apart for the company last year during the height of the crypto winter. Users of the platform were shocked one day last summer to see that all withdrawals had been halted, and thus they couldn’t access their hard-earned money. Things, however, didn’t quite stop there, as just a few weeks later, Celsius announced it had formally entered bankruptcy proceedings and was in the process of liquidating its assets.

Soon after this began, Mashinksy said he was stepping down from his position as the company’s CEO and that he would instead be serving in a silent role. He mentioned that he knew his presence had become a serious distraction in recent weeks, and that he would be working to help the company out of its present doldrums and try to help customers get their funds back. In a statement, he said:

I regret that my continued role as CEO has become an increasing distraction, and I am very sorry about the difficult financial circumstances members of our community are facing. Since the pause, I have worked tirelessly to help the company and its advisors put forward a viable plan for the company to return coins to creditors in the fairest and most efficient way.

But stepping down from the CEO position clearly wasn’t enough, as federal prosecutors say he repeatedly lied about the company’s financial health and gave traders and investors false impressions prior to its collapse. An SEC lawsuit states:

Defendants also falsely claimed that Celsius had one million active users on Celsius’ platform. It did not. Celsius’ own internal data, which was regularly shared with Mashinsky, showed that the company only had approximately 500,000 users who had ever deposited crypto assets on the company’s platform and that many were no longer active users.

U.S. attorney Damian Williams explained in an interview:

From its inception, Celsius was taking far greater risks with customers’ money than Mashinsky advertised. A platform that advertised as ‘the safest place for your crypto’ left investors holding billions in losses.

SEC enforcement director Gubir Grewal also threw his two cents into the mix, commenting:

Ultimately, the defendants’ elaborate crypto fraud collapsed under its own weight. When it collapsed, unfortunately, it left thousands of investors lined up at the door of bankruptcy court.

In the Dark for a Long Time

The SEC lawsuit continues with:

By 2022, Celsius’ business was unsustainable, and it became clear internally that the company would fail. One employee called Celsius a ‘sinking ship,’ while another wrote that ‘There is no hope… there is no plan,’ and that Celsius’ business model ‘is fundamentally broken.’

Nick Marinoff
Nick Marinoffhttps://www.livebitcoinnews.com/
Nick Marinoff is currently a lead news writer and editor for Money & Tech, a San Francisco-based broadcasting station that reports on all things digital currency-related. He has also written for a number of other online and print publications including Black Impact Magazine, EKT Interactive, Seal Beach USA and Benzinga.com, to name a few. He has recently published his first e-book "Take a 'Loan' Off Your Shoulders: 14 Simple Tricks for Graduating Debt Free" now available on Amazon. He is excited about the potential digital currency offers, particularly its ability to finance unbanked populations and bring nations together financially.

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