Founder of failed crypto lending platform Celsius Network arrested for fraud

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The founder and former CEO of failed cryptocurrency lending platform Celsius Network has been arrested on federal fraud charges alleging he conspired to defraud customers by misleading them about key aspects of the business

NEW YORK — The founder and former CEO of failed cryptocurrency lending platform Celsius Network was arrested on Thursday on federal fraud charges alleging he conspired to defraud customers by misleading them on key aspects of the business.

Alexander Mashinsky is charged with securities, commodities and wire transfer fraud in an unsealed indictment in federal court in Manhattan. He is also accused of illegally manipulating the price of Celsius’ proprietary crypto token while secretly selling his own tokens at inflated prices.

Mashinskys attorney did not immediately respond to a message seeking comment.

According to the indictment, Mashinsky from 2018 to 2022 introduced customers to Celsius as a modern bank where they could securely deposit crypto assets and earn interest. But he says Mashinsky operated Celsius as a venture fund, taking clients’ money under false and misleading pretenses and exposing clients to a high-risk business.

The indictment alleges that Mashinsky promoted Celsius through media interviews, his Twitter account and the Celsius website, as well as a weekly Ask Mashinsky Anything session that aired on the site. Celsius website and YouTube channel.

Celsius employees from multiple departments who noticed false and misleading statements during the sessions tipped off Mashinsky, but they were ignored, the indictment says.

Mashinsky’s misrepresentation of Celsius as a safe and secure institution resulted in an exponential growth in its customer base through a large number of retail investors, according to the indictment.

By fall 2021, Celsius had become one of the largest crypto platforms in the world, allegedly holding around $25 billion in assets, he says.

On Thursday, the Securities and Exchange Commission also sued Mashinsky and Celsius, claiming they misled investors through unregistered and often fraudulent offers and sales of crypto asset securities.

In January, New York Attorney General Letitia James sued Mashinsky in Manhattan state court, claiming he misled hundreds of thousands of investors.

Celsius filed for bankruptcy last year.

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