Celsius Founder Facing Fraud Charges and 3 Regulatory Lawsuits

The ex-CEO of Celsius is facing federal fraud charges as the government’s crackdown on the cryptocurrency sector continues.

In addition to the charges filed Thursday (July 13) by the Department of Justice, Alex Mashinsky, 57, was also sued by three different federal regulators over the collapse of his company last year.

Among them was the Federal Trade Commission (FTC), which on Thursday announced a settlement with the company that permanently bans it from handling customers’ funds.

“Celsius touted a new business model but engaged in an old-fashioned swindle,” FTC Bureau of Consumer Protection Director Samuel Levine said in a news release.

“Today’s action banning Celsius from handling people’s money and holding its executives accountable should make clear that emerging technologies are not above the law.”

In an indictment unsealed Thursday, prosecutors allege Mashinsky and co-defendant Roni Cohen-Pavone, the company’s chief revenue officer, operated their company “as a risky investment fund,” taking in money under false pretenses.

The Department of Justice also accuses the executives and other Celsius employees of illegally manipulating the price of the company’s digital currency CEL, causing people to purchase it at inflated prices.

A report by Bloomberg News Thursday notes that Mashinsky is also being sued by the Securities and Exchange Commission and Commodity Futures Trading Commission.

Mashinsky was also sued earlier this year by the New York Attorney General, in a suit that accused him of defrauding investors out of billions of dollars.

Celsius filed for bankruptcy in June of last year, one of several cryptocurrency companies to run into trouble during the downturn in the digital assets sector.

As PYMNTS has written, the company had become a big name in the crypto sector by offering high returns while claiming to be less risky than a regular bank.

“But the company got into trouble by offering big yields to crypto depositors while making big loans that were backed by insufficient collateral,” PYMNTS wrote. “That left the company vulnerable to a market downturn.”

Celsius was founded in 2017 by Mashinsky. The company was valued at more than $3 billion at one point. Mashinsky said last year that the bankruptcy was “the right decision.”

“This is the right decision for our community and company,” he said. “I am confident that when we look back at the history of Celsius, we will see this as a defining moment.”