US prosecutors have arrested the former head of cryptocurrency platform Celsius Network, Alexander Mashinsky, on fraud charges. The arrest comes a year after the platform filed for bankruptcy protection, leaving investors owed $4.7 billion. Mashinsky is facing seven criminal counts, including securities fraud, wire fraud, and market manipulation. He is accused of orchestrating a scheme to defraud customers through false claims about the safety and security of the Celsius platform. The US Attorney for the Southern District of New York, Damian Williams, stated that it doesn’t matter if it’s traditional or crypto fraud; it’s all fraud to them. Mashinsky, who holds Ukrainian, Israeli, and US citizenship, could face decades in prison if convicted. The former chief revenue officer of Celsius, Roni Cohen-Pavon, was also charged but is currently abroad.
Celsius Network, once boasting over one million clients and holding $25 billion in assets, suffered as the value of cryptocurrencies plummeted in 2022. Facing significant customer withdrawals, the platform froze customer accounts before filing for bankruptcy protection. The Department of Justice (DOJ) noted that Mashinsky continued to assure customers of Celsius’ financial strength, even as he removed approximately $8 million of his own assets from the platform. In a parallel case, the Federal Trade Commission (FTC) announced a settlement with Celsius that permanently bans the platform from handling customer assets. Celsius also agreed to a judgment of $4.7 billion, which will be suspended to allow the company to return remaining assets to consumers in bankruptcy proceedings. The FTC will proceed with a civil case against Mashinsky and two other co-founders.
The arrest and charges against Mashinsky highlight the ongoing scrutiny and regulatory pressure on the cryptocurrency industry. Authorities are increasingly cracking down on fraudulent activities, aiming to protect investors and maintain the integrity of the market. The case serves as a reminder that no one is above the law, regardless of whether they operate in traditional finance or the digital realm.
As cryptocurrency continues to gain popularity and attract more participants, it is crucial for regulators to ensure the necessary safeguards are in place. This includes implementing robust compliance measures, conducting thorough due diligence on platforms and operators, and enforcing strong penalties for fraudulent activities. By doing so, trust and confidence in the crypto market can be maintained, fostering its long-term viability and growth.