Celsius Network, Founder Alex Mashinsky and Former CRO Criminally Charged with Fraud, Mashinsky Arrested

Alex Mashinsky Arrested Today.

The founder and former CEO of Celsius Network, Alex Mashinsky, and the former Chief Revenue Officer of Celsius, Roni Cohen-Pavon have been charged by the US Department of Justice with defrauding customers and manipulating the market for the Celsius token.

Celsius collapsed into bankruptcy in spectacular fashion in 2022.  Celsius effectively ceased operations in mid-June of 2022 as crypto valuations rapidly declined, and it was unable to make customer redemptions. Celsius and its Earn program attracted customers by promising high returns on parked assets while promoting its anti-bank mantra that banks are not your friend.

The DOJ has charged Mashinsky with securities fraud, commodities fraud, and wire fraud for defrauding customers and misleading them about core aspects of the company he founded.

Both Mashinksy and Cohen Pavon have been charged with conspiracy, securities fraud, market manipulation, and wire fraud for illicitly manipulating the price of CEL, its native token, while they sold their own CEL tokens at inflated prices.

Mashinsky was reportedly arrested today and is said to be presented this afternoon before a US Magistrate.  Cohen-Pavon, an Israeli citizen and resident, is said to be currently abroad.

U.S. Attorney Damian Williams announced today that the United States has entered into a non-prosecution agreement with Celsius, pursuant to which Celsius has agreed to accept responsibility for its role in the fraudulent schemes.  In entering into the Agreement, the Office considered the fact that Celsius is in Chapter 11 bankruptcy proceedings and is making efforts to maximize recovery for victims in connection with the bankruptcy, as well as the fact that Celsius dramatically improved its cooperation after the Government brought certain production failures to the attention of the Special Committee of Celsius’s Board of Directors.

Williams commented on the prosecution:

“Exactly one year ago today, Celsius Network, a crypto platform that, at its height, managed approximately $25 billion in customer assets, filed for bankruptcy protection in the Southern District of New York.  Over the course of the past year, we have worked quickly to get to the bottom of what led to Celsius’s collapse and to understand how a platform that advertised itself as the ‘safest place for your crypto’ could have left investors holding billions of dollars in losses.  Today we have the answer.  Today I am announcing the unsealing of an indictment charging Celsius’s founder and CEO, Alex Mashinsky, with orchestrating a scheme to defraud customers of Celsius through a series of false claims about the fundamental safety and security of the Celsius platform, and for participating in a scheme with Celsius’s Chief Revenue Officer, Roni Cohen-Pavon, to inflate the price of Celsius’s proprietary token, CEL.  This case, like the others my Office has recently announced alleging fraud in the crypto economy, may appear complicated.  But the message we send today is quite simple: if you rip off ordinary investors to line your own pockets, we will hold you accountable.  Whether it’s old-school fraud or some new-school crypto scheme, it doesn’t matter one bit.  It’s all fraud to us.  And we’ll be here to catch it.”

FBI Acting Assistant Director in Charge Christie M. Curtis added that Mashinsky and Cohen-Pavon deliberately misrepresented the company’s business model and “criminally manipulated” CEL.

The DOJ noted that Celsius and its services were promoted as safe and secure while growing its customer base – many of its users being retail investors. At one point, Celsius claimed approximately $25 billion in assets.

The DOJ pointed to a private message from Cohen-Pavon to Mashinsky that described CEL value as “fake” as the firm propped it up. While trading at an inflated price, CEL was allegedly sold by Mashinsky, Cohen-Pavon, and other Celsius executives.

Mashinsky is said to have personally booked approximately $42 million in proceeds from his sales of CEL.

Cohen-Pavon is said to have personally gained at least $3.6 million in proceeds from his sales of CEL.  ]

After Celsius halted trading and redemptions, Mashinsky continued to state that all was well publicly. Meanwhile, he removed $8 million of his own assets from the Celsius platform.

The DOJ has posted an outline of potential jail time for Mashinsky and Cohen-Pavon with Mashinsky’s maximum sentence, if found guilty, being over 100 years.

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