Alex Mashinsky, CEO of bankrupt crypto lender Celsius Network, pleaded not guilty to fraud charges brought against him in the US on Thursday. The authorities accused him of defrauding customers and manipulating the price of the platform’s native crypto token, CEL.
The U.S. Department of Justice arrested him on Thursday morning. The feds charged him with seven criminal counts, including securities, commodities, and wire fraud. In charge of the Criminal Division of the New York Field Office, Michael A. Brodack claimed Mashinsky earned over $40 million after allegedly manipulating the value of the company’s native token.
They also accused his partner, Roni Cohen-Pavon,36, the former chief revenue officer, of manipulating CEL’s price. Brodack alleged that he received approximately $3.6 million. According to the Justice Department, Israeli Cohen-Pavan is currently out.
Celsius founder and former Chief Revenue Officer charged in connection with multibillion-dollar fraud and market manipulation schemeshttps://t.co/zyUODJAqk5
— US Attorney SDNY (@SDNYnews) July 13, 2023
Federal prosecutors said Mr. Machinsky, 57, misled customers into believing Celsius was a reliable platform to park their funds and earn interest. But, in reality, it posed risks. Three federal regulatory authorities, the SEC, CFTC, and FTC, also sued him for defrauding investors out of billions.
During a hearing in federal court in Manhattan, Mashinsky pleaded not guilty. Ona Wang, a US Magistrate Judge, approved his release on a $40M bond.
US Attorney Damian Williams stated:
“Whether it’s old-school fraud or some new-school crypto scheme, it doesn’t matter one bit. It’s all fraud to us.”
According to his attorney, Jonathan Ohring, Mashinsky vehemently denies the allegations and is eager to defend himself in court vigorously.
Celsius Agrees To Pay $4.7B
Celsius was founded in 2018 and became popular as a crypto bank. It offered extremely high-interest rates to customers. The company managed tens of billions of dollars in deposits before suffering a major setback last year. Moreoever, he appeared in YouTube videos where he said that Celsius was a safer and better alternative to traditional banks.
At its peak, the firm handles around $25 billion worth of crypto assets. But last summer, Celsius filed for bankruptcy due to a larger collapse in the crypto space. This caused the price of the coin to fall significantly. In the process, Celsius wiped out deposits of over 500,000 clients.
In September, Mashinsky stepped down from the company, calling his role as “an increasing distraction.” When it filed for bankruptcy, approximately $4.7 billion of client funds on the platform were frozen.
In an agreement with FTC on Thursday, the company decided to pay that sum as compensation to customers. However, payments will be suspended while the bankruptcy process continues.