Former CEO of crypto lender Celsius, Alex Mashinsky, has been arrested on July 13, following a probe into the company’s collapse. The arrest came shortly after the United States Securities and Exchange Commission (SEC) filed a lawsuit against Celsius on the same day.
According to Bloomberg, Mashinsky was indicted by the U.S. Department of Justice on charges of fraud and intention to manipulate the market. Legal experts expect him to face a lengthy prison sentence, given the scale of capital involved in the allegations.
This development comes after Celsius Network filed for bankruptcy on July 14 last year. Mashinsky was previously found guilty by investigators of the Commodity Futures Trading Commission for breaking numerous U.S. regulations prior to the company’s implosion in 2022.
The investigation against Mashinsky began when the New York Attorney General sued him on January 5, alleging that he misled investors and caused billions of dollars in losses. The former CEO was accused of lying about the risks of investing in Celsius, hiding its deteriorating financial condition, and failing to register in New York.
The troubles for Celsius and Mashinsky began in June last year when the crypto lender abruptly suspended withdrawals on its platform. Shortly after, securities regulators from five different U.S. states opened an investigation into Celsius, and within a month, the company filed for bankruptcy.
While the collapse of the Terra ecosystem and the crypto hedge fund Three Arrows Capital had a larger impact on Celsius, a CFTC investigation found that Mashinsky and the company had also violated banking laws and misled their customers.
In 2021, the Celsius cryptocurrency lending platform gained traction during the bull run, offering attractive interest rates on cryptocurrency deposits. Mashinsky promoted these products as safer alternatives to traditional banks. However, the demise of Terra’s stablecoin and a slump in the cryptocurrency market severely impacted Celsius’ business.
Mashinsky’s arrest and the lawsuit against Celsius come shortly after the SEC’s lawsuits against crypto exchanges Binance and Coinbase. These incidents reflect the increased scrutiny and regulatory actions being taken against the crypto industry by government authorities.
Cointelegraph reached out to Celsius network for comments, but there was no immediate response.
Overall, these events highlight the challenges and legal risks faced by participants in the crypto industry. As the regulatory environment evolves, it is crucial for companies and individuals to adhere to laws and regulations to maintain trust and confidence in the market.
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