By Celsius Networks, a prominent crypto lender, experienced a tumultuous downfall despite founder and CEO Alexander Mashinsky’s reassurances of its stability. Recent federal charges expose the truth behind the scenes.
Internal court documents have surfaced, revealing that Celsius insiders referred to the company as a “sinking ship” with a fundamentally broken business model. Employees expressed doubts about the company’s future prospects and profitability, culminating in a halt on all withdrawals in June 2022 and subsequent bankruptcy filing a month later.
As expected, Mashinsky now faces a series of consequences. The 57-year-old CEO has been arrested and charged with various federal crimes including conspiracy, securities fraud, market manipulation, and wire fraud. Furthermore, both the Securities and Exchange Commission and the Commodity Futures Exchange Commission have brought civil charges against him. The former Chief Revenue Officer of Celsius, Roni Cohen-Pavon, is also implicated in the criminal case.
U.S. Attorney Damian Williams stresses the importance of holding accountable those who deceive investors. Regardless of whether it involves traditional or cryptocurrency-related fraud schemes, dishonest practices will not be tolerated.
Under new management, Celsius has reached a non-prosecution agreement in the criminal case and committed to full cooperation. It has also settled with the Federal Trade Commission for $4.7 billion due to lying to investors and vowed to refrain from engaging in the sale of securities moving forward.
However, it is worth noting that Mashinsky and other Celsius executives are not part of the agreement with the FTC. The case against them remains ongoing, with the settlement postponed until Celsius’ bankruptcy proceeding concludes.
As of this moment, Mashinsky is under federal custody and unavailable for comment. It is unknown whether he has obtained legal representation to address the charges brought against him. Moreover, an attorney representing him in a separate civil case related to Celsius’ collapse has yet to respond to inquiries.
Allegations Against Celsius
The founder of Celsius, Alex Mashinsky, is facing serious allegations regarding the legitimacy of the company. The charges suggest that Celsius has been involved in fraudulent activities since its inception in 2018, when it started promoting its investor program with enticing promises of “financial freedom” and “economic opportunity.”
According to investigators, the core of Celsius’ deceit revolved around two main offerings: the sale of its own coin, CEL, which supposedly generated high “earning rates” for investors, and the Earn Interest Program, which offered substantial returns of up to 17% by utilizing investors’ deposits for loans.
However, it has been revealed that this was all smoke and mirrors. Mashinsky allegedly manipulated the price of CEL through secret purchases, creating a false impression of its value. Despite claiming that Celsius had sufficient funds to cover promised interest payments, the company consistently fell short.
Internal reports from early 2022 indicate that Celsius was experiencing significant financial losses and liquidity constraints, making its current business model unsustainable.
In 2021 alone, Celsius suffered a staggering loss of over $800 million. By the first quarter of 2022, the company had accumulated an additional loss of $165 million, ultimately leading to its collapse and subsequent bankruptcy. The hole left by the company’s demise amounted to a staggering $1.2 billion.
Investigators have also uncovered evidence suggesting that Mashinsky misled investors about the number of customers Celsius had. He consistently claimed to have over one million customers, when in reality, the company never had more than 500,000 accounts, many of which were inactive.
Furthermore, court documents reveal that Mashinsky falsely stated that Celsius had raised $50 million during its initial coin offering for CEL. The truth was that only 65% of this amount was actually raised, with Mashinsky secretly purchasing the remaining coins to artificially inflate their price.
These allegations paint a grim picture of a company built on false promises and manipulated finances. The repercussions of Celsius’ actions have had disastrous consequences for both investors and the company itself. As the legal process unfolds, the full extent of the fraud will be unveiled.
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