More Cryptocurrency Fraud Charges

In the latest example of the dangerous cryptocurrency landscape, federal authorities arrested the founder and former chief executive of Celsius Network on July 13 and charged him with defrauding customers of the failed crypto-exchange. The Justice Department charged Alex Mashinsky with seven criminal counts, including  market manipulation, securities fraud, and commodities fraud.

Customers of Celsius tried to make money by lending out their cryptocurrency tokens. But, according to the criminal charges, Celsius misled customers about the value of its proprietary crypto token. The company collapsed into bankruptcy in the summer of 2022, admitting that its liabilities exceeded its assets by $1.2 billion. Investors have since been waiting for the bankruptcy process to unfold, recognizing that they may recoup only a fraction of their original investments.

In conjunction with the Justice Department, the Securities and Exchange Commission, Commodity Futures Trading Commission, and the Federal Trade Commission all filed civil suits alleging that Celsius had defrauded clients. The regulators allege that Mashinsky repeatedly lied about Celsius’ finances, its userbase, and investor assets being insured.

Since the collapse of Celsius Network, a string of cryptocurrency exchange failures have followed, including the bankruptcy of FTX. Meanwhile, federal regulators are aggressively cracking down on crypto firms, with the SEC suing Binance and Coinbase, the leading cryptocurrency exchanges.

Mashinsky pleaded not guilty to the criminal charges and was released on a $40 million bond, secured by his Manhattan home.