Crypto asset platform Celsius Network LLC and its former executives, Alexander Mashinsky and Roni Cohen-Pavon, are facing serious charges of securities fraud, commodities fraud, and wire fraud. The United States Attorney for the Southern District of New York, Damian Williams, along with FBI New York Field Office Acting Assistant Director in Charge, Christie M. Curtis, made the announcement regarding the allegations.
The indictment, which has been unsealed in Manhattan federal court, accuses Mashinsky of intentionally deceiving retail customers about the business and financial condition of Celsius Network. The alleged intent was to gain customers’ trust and convince them to entrust their cryptocurrency assets to Celsius while using its services. Mashinsky is said to have exaggerated the risks associated with depositing crypto assets with Celsius while downplaying the security of Celsius’s yield-generating activities, its profitability, and the reliability of its high rewards rates.
The accusations against Celsius Network’s founders, Mashinsky and Cohen-Pavon, suggest a long-term plot to disseminate false information about the popularity and value of the company’s native cryptocurrency token, CEL. It is alleged that Celsius was compelled to spend hundreds of millions of dollars on CEL purchases from the open market in order to manipulate the company’s stock price. During Mashinsky’s tenure at Celsius, he and Cohen-Pavon, along with other alleged conspirators, are said to have utilized customer deposits to fund market purchases of CEL, artificially inflating its price.
Celsius Network, LLC has acknowledged its involvement in the fraud schemes and has expressed its commitment to cooperating with the authorities. In fact, Celsius has entered into a non-prosecution agreement with the United States, signaling its acceptance of responsibility. The prosecutor’s office has taken into account Celsius’s Chapter 11 bankruptcy proceedings and its efforts to maximize recovery for victims in connection with the bankruptcy. The office has also acknowledged the substantial improvement in Celsius’s cooperation since the government brought certain production failures to its attention.
The case against Mashinsky is currently being heard by U.S. Magistrate Judge Ona T. Wang, following his arrest. Meanwhile, Cohen-Pavon, who was born and raised in Israel, is currently in another country. The federal district court judge, John G. Koeltl, has been appointed to preside over the case.
At the time Celsius announced it was halting all customer withdrawals on June 12, 2022, hundreds of thousands of Celsius customers, including many retail investors, had approximately $4.7 billion worth of crypto assets on the platform. On July 13, 2022, Celsius submitted a Chapter 11 bankruptcy petition.
Celsius Network’s journey from filing for bankruptcy to facing charges has taken almost a year. Authorities have conducted extensive investigations to determine the reasons behind the platform’s failure and the loss of billions of dollars by investors who believed it to be the “safest place for your crypto.”
U.S. Attorney Damian Williams emphasized the straightforward nature of the case, stating that anyone who deceives ordinary investors to benefit themselves will be held accountable, regardless of whether it is a traditional fraud or a sophisticated crypto scheme. The message is clear: fraudulent activities will not go unnoticed or unpunished.
FBI Acting Assistant Director in Charge Christie M. Curtis highlighted the alleged involvement of Mashinsky and Cohen-Pavon in complex financial schemes. The deliberate misrepresentation of Celsius Network’s business model and the manipulation of the value of its proprietary crypto token, CEL, are serious allegations. The Federal Bureau of Investigation is committed to pursuing those responsible for misrepresenting a company’s financial health to commit fraud.
In conclusion, the accusations against Celsius Network LLC and its former executives underscore the vulnerability of the cryptocurrency market to fraud and scams. Investors are advised to exercise extreme caution when dealing with cryptocurrency and conduct thorough due diligence. As the industry expands, it becomes increasingly important to establish regulations that protect investors and uphold the legitimacy of the market.
First reported on Bloomberg
Frequently Asked Questions
Q: What charges is Celsius Network LLC facing?
A: Celsius Network LLC is facing charges of securities fraud, commodities fraud, and wire fraud.
Q: Who are the individuals accused in this case?
A: Alexander Mashinsky, the founder and former CEO of Celsius Network, and Roni Cohen-Pavon, the former chief revenue officer, are the individuals accused of illegally manipulating the price of Celsius’s crypto token and defrauding customers.
Q: What are the allegations against Celsius Network?
A: The allegations include deceiving customers about the company’s business and financial condition, manipulating the price of its crypto token, and selling their own tokens at inflated prices.
Q: What penalties do the accused individuals face?
A: Mashinsky and Cohen-Pavon face charges of conspiracy, securities fraud, market manipulation, and wire fraud, which carry potential legal penalties if found guilty.
Q: Has Celsius Network accepted responsibility for the fraud schemes?
A: Yes, Celsius Network has acknowledged its involvement in the fraud schemes and has entered into a non-prosecution agreement with the United States.
Q: What is the current status of the case?
A: The case is being heard in Manhattan federal court, with U.S. Magistrate Judge Ona T. Wang presiding over the case against Mashinsky. Cohen-Pavon, who is currently in another country, will have John G. Koeltl, a federal district court judge, presiding over his case.
Q: How does Celsius Network plan to address the situation?
A: Celsius Network has promised to continue cooperating with the authorities and is making efforts to maximize recovery for victims through Chapter 11 bankruptcy proceedings.
Q: What were the consequences for Celsius Network’s customers?
A: When Celsius Network halted all customer withdrawals, approximately $4.7 billion worth of crypto assets belonging to hundreds of thousands of customers, including retail investors, were still on the platform.
Q: How long has the investigation into Celsius Network been ongoing?
A: The authorities have been investigating Celsius Network for almost a year to understand the reasons behind its failure and the resulting loss of billions of dollars.
Q: What message does the U.S. Attorney’s Office and FBI want to convey?
A: The authorities want to emphasize that anyone who deceives investors for personal gain, regardless of whether it is a traditional or crypto-related fraud scheme, will be held accountable.
Q: What steps should investors take to protect themselves from such scams?
A: Investors are advised to exercise extreme caution when dealing with cryptocurrencies, conduct thorough due diligence, and stay updated on regulatory developments in the industry.
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