The now-bankrupt crypto lending firm Celsius Network and its former CEO and co-founder Alex Mashinsky faced several lawsuits on Thursday morning from three separate American entities: The U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC).
Bloomberg also reported that Mashinsky was arrested and charged with fraud today, a person familiar with the matter said.
Mashinsky and Celsius’ chief revenue officer, Roni Cohen-Pavon, were charged by the U.S. District Court for the Southern District of New York on Tuesday for allegedly orchestrating a “scheme to defraud customers of Celsius Network,” according to a previously sealed indictment.
The company and Mashinsky raised billions of dollars from investors through “unregistered and fraudulent offers and sales of crypto asset securities,” according to the SEC filing on Thursday. They “falsely promised investors a safe investment with high returns” through its Earn Interest Program that told investors they could make as much as 18% in yield annually.
The SEC also alleged that Celsius’ token CEL and its erstwhile Earn Interest Program are securities, adding to the agency’s recent stance in other filings that a number of cryptocurrencies like BNB, BUSD, SOL, ADA and MATIC are securities.
Celsius filed for bankruptcy in June 2022, a month after freezing customer assets amid turbulence in the crypto market that toppled several crypto firms. A few weeks before the bankruptcy, a Celsius executive wrote in an internal message on May 21, 2022, “we don’t have any profitable services,” according to the SEC filing.
The New Jersey-headquartered startup, which was once valued at $3.25 billion when it extended its “oversubscribed” Series B financing round to $750 million in November 2021, said in a Chapter 11 bankruptcy filing in federal court in New York that it had anywhere between $1 billion and $10 billion in assets and liabilities and more than 100,000 creditors.
In May, a consortium called Fahrenheit announced it acquired Celsius’ assets. The group is made up of bidders led by investment firm Arrington Capital and includes crypto mining firm US Bitcoin Corp., Proof Group, Steven Kokinos and Ravi Kaza. As the name suggests, Arrington Capital is led by Michael Arrington, the founder of TechCrunch. Michael Arrington left TechCrunch in 2011.
The group’s plan is to distribute Celsius’ liquid assets to account holders. Illiquid assets, such as its institutional loan portfolio, mining business and alternative investments, will be managed by a new management team.
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