Alexander Mashinsky, the Founder of the bankrupt cryptocurrency lender, Celsius Network was arrested today (Thursday) in New York. The arrest was made as the United States Department of Justice (DOJ) and several regulators imposed multiple lawsuits against the troubled Founder and his company.

DOJ, SEC, CFTC and FTC Head to Court

In the complaint filed by DOJ before the district court in New York, the United States Attorney, Damian Williams unveiled seven counts of charges against Mashinksy and Roni Cohen-Pavon, Celsius’ former Chief Revenue Officer. These include allegations of securities, commodities and wire fraud as well as token manipulation.

The US law enforcement agency accused Mashinky of luring investors by lying about Celsius’ financial status and inflating the price of the business’ native token CEL. Because the former CEO of Celsius ‘falsely portrayed’ Celsius as a 'safe and secure institution’, the digital lending business ‘grew exponentially’ to become one of the biggest crypto lenders in the world, ‘purportedly’ managing about $25 billion at its peak period in the fall of 2021.

In its own lawsuit before the same New York court, the Securities and Exchange Commission (SEC) accused Celsius and Mashinsky of committing offences similar to those of the DOJ. However, it added that the company and its former CEO raised billions of dollars from investors [through unregistered and fraudulent offers and sales of crypto assets securities.]

[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,] Gurbir S. Grewal, the Director of the SEC’s Enforcement Division, announced in a statement.

Furthermore, the charges filed by the Commodities Futures Trading Commission (CFTC) and the Federal Trade Commissions are similar to those of the DOJ and the SEC. However, the CFTC in its lawsuit, the first against a digital asset lender, said Celsius and Mashinsky operated a [massive [‘unregistered’] commodity pool scheme involving digital assets commodities.]

However, the derivatives regulator in a statement said it had reached an agreement with Celsius to settle the charges through a court order that will permanently bar the company from engaging in such activities in the future. On the other hand, the CFTC will continue its litigation against Mashinsky and seek an order for the return of customers’ assets and illicit profit as well as a civil monetary penalty. In addition, the derivatives watchdog wants the court to put a permanent trading and registration ban on the Celsius Founder.

Meanwhile, in addition to raising similar allegations at the New York court, the United States Federal Trade Commission (FTC) accused Celsius and its executives of lying to investors that they maintained an insurance policy of $750 million on their deposits. On top of that, they deceived investors that they kept sufficient reserves to meet their customer obligations to them.

[Far from securing customers’ cryptocurrency deposits, Celsius took title to and misappropriated these deposits totalling more than $4 billion,] the FTC explained in a statement, citing the complaint. [The company used consumer deposits to fund its operations, pay rewards to other customers, borrow from other institutions, and make high-risk investments, which even the company acknowledged often lost money.]

What's more, the FTC alleged that Celsius lacked any system to track its assets and liabilities until mid-2021. And, as a result of these, the FTC issued a fine of $4.7 billion on Celsius and its affiliates. However, it said that it has reached an agreement with the companies to suspend the ‘judgment’ in order to [permit Celsius to return its remaining assets to customers in bankruptcy proceedings.]

Moreover, the FTC plans to continue its case against Mashinky and other Celsius Co-Founders, Shlomi Daniel Leon and Hanoch ‘Nuke’ Goldstein, who it said have not agreed to a settlement.