Celsius Network, a bankrupt cryptocurrency lender, has been fined $4.7 billion and permanently banned from handling consumers’ assets by US trade regulators. Additionally, three former executives of the company have been charged with deceiving users into transferring their digital tokens to the platform.
Deceptive Practices and False Promises
Before filing for bankruptcy in 2022, Celsius Network froze withdrawals and transfers for its 1.7 million customers, citing “extreme” market circumstances. However, the US Federal Trade Commission (FTC) stated on Thursday that Celsius had misled users by falsely assuring them that they could withdraw their deposits at any time. The FTC further revealed that the company failed to fulfil its commitment to maintain sufficient reserves to meet customer obligations and maintain a $750 million insurance policy for deposits. Celsius also made false claims about users earning rewards on deposits with high annual percentage yields of up to 18%.
Settlement and Penalties
According to the proposed settlement, Celsius and its affiliates will be prohibited from offering, marketing, or promoting any product or service related to depositing, exchanging, investing, or withdrawing assets. The company has also been hit with a $4.7 billion penalty. However, the FTC stated that this penalty will be suspended to allow Celsius to return assets to consumers through its bankruptcy proceedings. Meanwhile, former Celsius executives Alexander Mashinsky, Shlomi Daniel Leon, and Hanoch Goldstein have not agreed to a settlement, and the FTC’s case against them will proceed to federal court.
Legal Actions and Arrest
In addition to the regulatory actions, Alexander Mashinsky, the co-founder and former CEO of Celsius, was arrested and charged with fraud by the US attorney in Manhattan. The indictment revealed that Mashinsky and former Chief Revenue Officer Roni Cohen-Pavon face a combined total of eleven criminal counts. Separately, the US Securities and Exchange Commission (SEC) has filed a lawsuit against Mashinsky and Celsius, alleging that they misled investors and raised billions of dollars through the sale of unregistered cryptocurrency asset securities. Mashinsky and Celsius also face a fraud lawsuit from New York’s attorney general.
Celsius Network’s fine and ban, along with the charges against its former executives, highlight the consequences of deceptive practices in the cryptocurrency industry. The regulatory actions and legal proceedings against the company underscore the importance of maintaining transparency, fulfilling promises to users, and complying with regulatory requirements in the evolving landscape of digital assets.