Celsius CEO Claims He Was Misled
The investigation into the Celsius collapse is still ongoing, with new revelations about the platform and its management coming to light. Unfortunately, defrauded investors may have to wait even longer for compensation. Here’s the latest update on the Celsius case.
Why Did Celsius Collapse?
Celsius was founded in 2017 by Israeli entrepreneur Alex Mashinsky and entered the cryptocurrency market in late 2018 following an Initial Coin Offering (ICO). From 2019 onward, Mashinsky promoted Celsius as a reliable platform for long-term cryptocurrency investments, frequently assuring the public of low risks, secure custodial storage, and high returns.
However, investigations revealed significant discrepancies between the company’s public promises and its actual operations. Instead of following conservative investment strategies, Celsius engaged in high-risk activities, including lending against cryptocurrency collateral and using complex financial schemes to avoid taxes.
Additionally, it has come to light that Prime Trust, a cryptocurrency custodian, cut all business ties with Celsius in 2021 due to disagreements over the company’s strategy, which involved repeatedly rehypothecating the same assets to generate profits. However, this crucial detail was never disclosed by Mashinsky.
The Attorney General is seeking to permanently bar Alex Mashinsky from engaging in any activities related to the issuance, offering, or sale of securities, as well as to secure compensation and restitution for the investors.
Celsius's New York Office. Source: Х
After the FTX collapse in 2022 and the subsequent downturn in the cryptocurrency market, Celsius Network was unable to fulfill its obligations to investors. The company declared insolvency, leading to significant financial losses for thousands of people around the world. This bankruptcy attracted the attention of law enforcement and the U.S. Securities and Exchange Commission (SEC).
What Are the Accusations Against Mashinsky and Celsius?
The SEC's primary concern is the sale of the CEL token as an unregistered security, while prosecutors are focused on accusations of defrauding everyday investors.
In May 2023, New York Attorney General Letitia James filed the first lawsuit against Celsius, which included three main allegations:
The lawsuit stated that those affected by the platform included both seasoned investors and ordinary people who had invested their savings in cryptocurrencies, trusting Mashinsky’s assurances about the platform's safety. Many investors lost substantial amounts of their savings, with some losing everything, including borrowed funds.
- Defrauding hundreds of thousands of investors, including over 26,000 residents of New York.
- Misrepresenting and concealing the true financial state of the company.
- Failing to register its activities as a securities seller.
The lawsuit stated that those affected by the platform included both seasoned investors and ordinary people who had invested their savings in cryptocurrencies, trusting Mashinsky’s assurances about the platform's safety. Many investors lost substantial amounts of their savings, with some losing everything, including borrowed funds.
The Attorney General is seeking to permanently bar Alex Mashinsky from engaging in any activities related to the issuance, offering, or sale of securities, as well as to secure compensation and restitution for the investors.
Attorney General Letitia James. Source: PBS
After the charges were filed, Celsius Network CEO Alex Mashinsky filed a motion to dismiss all allegations against him. His legal team argued that the prosecutor was relying on false information sourced from Celsius's competitors and maintained that the company's collapse was due to unforeseen external factors.
However, these efforts were unsuccessful. In June, similar charges were brought against the company's Chief Revenue Officer, Roni Cohen. On July 13, Mashinsky was arrested and later released on $40 million bail. In August 2023, his bank assets were frozen, and a court order was issued preventing the sale of his property.
In September, Roni Cohen admitted guilt, agreed to cooperate with investigators, and provided the FBI with the necessary information.
To learn more about Alex Mashinsky and his business history, check out our article.
The Collapse of Celsius: New Details and Future Outlook
The high-profile fraud case involving Celsius Network continues to unfold. Mashinsky continues to assert his innocence, insisting that former top executives, including Cohen, who has already confessed, as well as co-founders Daniel Leon, Nuke Goldstein, and former executive director Aslihan Denizkurdu, be called to testify.
In the latest statement issued by Mashinsky’s lawyers on September 17, 2024, they emphasized the importance of Cohen’s testimony, claiming that Cohen was responsible for providing Celsius with legal advice on CEL token transactions from 2019 to 2022.
Prosecutors allege that Mashinsky and Cohen purchased $44 million worth of CEL tokens, artificially inflated their price, and then sold them while circumventing legal regulations. Mashinsky, however, denies any involvement in these transactions, claiming they were carried out without his knowledge. But the question remains: is it worth proving his non-involvement in a $44 million case when the total estimated losses are nearly $5 billion?
Roni Cohen (left) and Daniel Leon. Source: calcalistech
The law firm Stretto, which is overseeing Celsius's bankruptcy proceedings, announced that as of September 1, 2024, the platform had already paid out nearly $2.53 billion to its creditors as part of the ongoing bankruptcy process.
Additionally, a plan is in the works to create a mining company in which existing creditors of the bankrupt platform would receive a stake proportional to their unpaid investments.
Additionally, a plan is in the works to create a mining company in which existing creditors of the bankrupt platform would receive a stake proportional to their unpaid investments.
As for Alex Mashinsky, if all the charges are proven, he faces a prison sentence of up to 115 years.
This marks a tragic end to the business empire built by the Israeli crypto entrepreneur.
