Celsius Network Fined and Banned Amid Fraud Allegations

Celsius Network Faces Major Regulatory Action

The bankrupt cryptocurrency lender Celsius Network has been fined $4.7 billion by U.S. trade regulators. The firm is permanently banned from managing consumer assets following allegations of misleading practices. This action comes after Celsius restricted withdrawals and transfers for its 1.7 million users in 2022, citing "extreme" market conditions.

Deceptive Practices Unveiled

The U.S. Federal Trade Commission (FTC) stated that Celsius falsely assured users they could access their deposits anytime. Furthermore, the company failed to uphold promises of maintaining adequate reserves and a $750 million insurance policy for customer deposits. It also misled users about potential earnings, claiming rewards as high as an 18% annual return.

Settlement and Legal Proceedings

The FTC's proposed settlement bars Celsius and its affiliates from offering services related to asset deposits and exchanges. Although the $4.7 billion penalty will be suspended to facilitate asset returns during bankruptcy proceedings, former Celsius executives Alexander Mashinsky, Shlomi Daniel Leon, and Hanoch Goldstein face ongoing legal battles, as they have not settled with the FTC.

Criminal Charges Against Executives

In a related development, the U.S. attorney in Manhattan announced the arrest of Mashinsky, Celsius’s co-founder and former CEO, on fraud charges. An indictment reveals Mashinsky and ex-Chief Revenue Officer Roni Cohen-Pavon face eleven criminal counts. Additionally, the U.S. Securities and Exchange Commission has filed a lawsuit against Mashinsky and Celsius, accusing them of misleading investors and selling unregistered cryptocurrency securities.

Broader Legal Challenges

Celsius and Mashinsky are also embroiled in a lawsuit from New York's attorney general over similar fraud allegations. These developments highlight the regulatory crackdown on cryptocurrency firms engaged in deceptive practices, emphasizing the importance of transparency and accountability in the digital asset industry.