Those transactions lined "his own pockets to the tune of $42 million," Williams said.
The Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Federal Trade Commission also charges filed against Mashinsky. The FTC charges, which were also brought against two other Celsius co-founders, came as the agency hit a pending settlement agreement of $4.7 billion with Celsius preventing you from handling client assets.
Jonathan Ohring, a lawyer representing Mashinsky, said in an email that the former Celsius CEO โvehemently denies the allegationsโ and โexpects to defend himself vigorously in court against these baseless charges.โ
While crypto executives and lobbyists are already up in arms over SEC surveillance of the $1 trillion market, the Celsius charges indicate authorities are far from over, even after targeting some of the biggest names in the world. market, like Binance, coin base and Kraken.
SEC compliance director Gurbir Grewal said at the press conference that the charges offer another example of why cryptocurrency firms must comply with US securities laws. Wall Street's top regulator has discussed repeatedly with digital asset platforms like Coinbase and Binance, who have argued that crypto assets cannot meet existing market rules and need custom regulation.
The Celsius case โprovides another stark reminder of the consequences of default in crypto markets,โ Grewal said.
Celsius was one of several high-flying crypto companies which collapsed last year when the contagion swept through the markets. The company, founded in 2018, was best known for offering investors a way to "lend" their crypto assets in exchange for interest payments that could be as high as 17 percent, a program that Celsius advertised as the "safest place for your cryptography". โ according to the authorities. Investors piled in. Balances in the Celsius Interest Earning Program exceeded $13 billion in August 2021, according to the SEC.
But prosecutors allege that the reality was different from what Mashinsky and the company presented to the public. Behind the scenes, Celsuis was making risky investments and making unsecured loans to try to keep up with interest rate obligations, an effort that ultimately led to his downfall, the SEC said in its lawsuit.
Mashinsky โpresented Celsius as a modern bank, where clients could safely deposit crypto assets and earn interest,โ Williams wrote in the criminal indictment. "In truth, however, [Mashinsky] Celsius operated like a risky mutual fund, taking clients' money under false and deceptive pretenses and turning clients into unwitting investors in a far riskier and far less profitable business than [he] had represented.โ
Separately, in 2018, Celsius created CEL, which the SEC says is a security.
Authorities allege that soon after, Mashinsky and Celsius' former chief revenue officer, Roni Cohen-Pavon, began misleading the public and the market about the value and interest in CEL so that they could each sell the token at inflated prices.
The two allegedly did so by causing the company to spend hundreds of millions of dollars buying CEL on the open market, in some cases even using customer deposits to do so, according to the indictment.
Sam Sutton contributed to this report.
