Ex-Celsius CEO Mashinsky charged in latest DOJ crypto case

The former chief executive officer of bankrupt crypto lender Celsius Network was charged with fraud and sued by three regulatory agencies over the company's collapse.

Alex Mashinsky, 57, was also charged with attempting to manipulate crypto currencies in federal court in New York Thursday. The Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Trade Commission also filed lawsuits against Mashinsky and the company.

Prosecutors claim that from 2018 through June 2022, Mashinsky "orchestrated a scheme to defraud customers of Celsius Network LLC and its related entities," according to the indictment unsealed Thursday.

Celsius was one of several high-profile crypto firms that imploded last year. The company gained popularity paying high interest rates on digital-asset deposits. But following the collapse of the TerraUSD stablecoin and a downturn in the digital-asset markets the company was left with a giant hole in its balance sheet and unable to meet an influx of customer withdrawals.

Mashinsky's lawyer didn't immediately reply to an email seeking comment. A second company official, Chief Revenue Officer Roni Cohen-Pavon, was also arrested, prosecutors said.

The price of CEL token issued by Celsius dropped about 6% to around 15 cents, according to data from CoinMarketCap, after the SEC sued the lender and Mashinsky. It had traded as high as $8 in June 2021.

Mashinsky is the latest crypto industry figure to face charges after a market downturn exposed shady practices and in some cases, fraud, across the sector. Mashinsky, who helped start Celsius in 2017, has been under intense scrutiny from multiple government agencies since his firm filed for bankruptcy and declared a $1.19 billion deficit 12 months ago. 

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Misleading statements

The SEC alleged that Mashinsky and his company made misleading statements to encourage investors to purchase its token, CEL, and to put money into the firm's Earn Interest Program that promised returns as high as 17% on users' crypto deposits. 

The regulator also accused Mashinsky of misrepresenting Celsius's financial success to make it appear more profitable than it really was. For instance, the SEC said he falsely claimed the firm made $50 million from an initial coin offering when in actuality it raised less than 65% of its goal — something Mashinsky took steps to hide from the public.

New York Attorney General Letitia James was first to strike against Mashinsky and sued him in January for fraud. James accused Mashinsky of duping New York investors out of billions of dollars in crypto assets by making false and misleading statements about the lender's safety. 

The actions against Celsius mark the latest in a string of civil and criminal crypto cases brought by US authorities this year. SDNY has charged a slew of industry actors for alleged misconduct — most notably FTX co-founder Sam Bankman-Fried, who's been accused of misleading investors and mishandling billions of dollars of customer funds.