The company agrees to pay a settlement of $4.7 billion and to put the former CEO of Celsius in jail.
Alex Mashinsky, who used to be the CEO of Celsius, was arrested Thursday on federal securities fraud charges; this happened at the same time that the now-bankrupt crypto exchange agreed to pay the government $4.7 billion in a settlement.
The SEC and CFTC also said the exchange had planned to cheat investors of billions of dollars. The $4.7 billion deal is one of the biggest in FTC history, coming close to Meta’s $5 billion fine in 2019. It shows what the FTC said about Celsius and Mashinsky’s lies and how often he told them.
Mashinsky also faces charges of securities fraud, commodities fraud, wire fraud, and other types of fraud and manipulation linked to securities by the federal government. If they are found guilty, Mashinsky and another suspect, Roni Cohen-Pavon, could spend decades in prison.
Mashinsky said he wasn’t guilty of the theft charges in a federal court in New York.
Federal authorities said in a charging document that Mashinsky lied about several things, including the safety of Celsius’s yield-generating activities, Celsius’s profitability, the long-term sustainability of Celsius’s high reward rates, and the risks of depositing crypto assets with Celsius.
The deal, made public by the FTC, will be paid out once the company files for bankruptcy and can return any customer assets.
The SEC is suing both Mashinsky and Celsius at the same time. The SEC says that Mashinsky lied to investors and rigged the price of CEL, the trade token for Celsius, just like the federal government did.
The SEC says that Mashinsky and his company “misrepresented” its “central business model and the risks to investors” by saying that Celsius didn’t do risky trading and gave most, but not all, of its revenue to investors.
Both the lawsuit from the SEC and the charges from federal officials in New York say that the exchange token from Celsius is security. Over the past few months, other crypto companies have fought a lot about security and how much control the SEC should have over crypto markets.
In January of this year, officials in New York said that Mashinsky had scammed investors out of $20 billion.
