The Securities and Exchange Commission (SEC) has filed charges against Celsius Network and its founder and former CEO, Alex Mashinsky.
At the same time, the US Department of Justice has filed criminal charges against Celsius, Mashinsky and former Chief Revenue Officer Roni Cohen-Pavon.
The SEC announced the charges alleging the violation of the registration and anti-fraud provisions of the federal securities laws, including the failing to register the offers and sales of Celsius’s crypto lending product, the Earn Interest Program; making false and misleading statements to investors of the Earn Interest Program and Celsius’s native token, CEL; and engaging in market manipulation as it relates to CEL.
Celsius launched in 2018 and grew rapidly as it promised outsized returns for its users. The company’s Earn program allowed investors to hand over their crypto in return for interest payments.
The SEC alleges that the Earn Interest Program constituted the offer and sale of securities under the federal securities laws, and no registration was filed or in effect for the offering, and no exemption from registration was available.
Additionally, Mashinsky allegedly made false and misleading statements regarding the operation of the business, while participating in a scheme to manipulate the price of CEL.
Gurbir S. Grewal, Director of the SEC’s Enforcement Division, commented on the enforcement action, stating that Celsius lied to investors by presenting itself as a safe investment opportunity.
“Thousands of retail investors have experienced significant financial hardship as a result of Celsius’s and Mashinsky’s illegal conduct, and today we are holding Celsius and Mashinsky responsible for defrauding thousands of retail investors.”
Celsius is cooperating with the SEC and has consented to the relief requested in the complaint, which includes a permanent injunction against future securities law violations.
The SEC’s complaint charges Celsius and Mashinsky with violating registration and anti-fraud laws. The SEC seeks an injunction that prohibits Mashinsky from participating, directly or indirectly, in the purchase, offer, or sale of any crypto asset securities or engaging in activities for the purposes of inducing or attempting to induce the purchase or sale of any crypto asset securities by others.
The complaint also seeks to bar Mashinsky from acting as an officer or director of a public company and seeks monetary relief in the form of civil penalties, disgorgement of profits, and prejudgment interest.