In a dramatic turn of events, Alex Mashinsky, the founder and CEO of Celsius Network Limited, has pleaded not guilty after being arrested on Thursday in the United States, as per the Reuters report.
The renowned cryptocurrency lender faces criminal charges, including securities fraud, commodities fraud, and wire fraud, according to federal prosecutors.
The allegations revolve around a scheme in which Mashinsky purportedly defrauded customers by misrepresenting the safety of Celsius as a storage space for their assets, concealing associated risks, According to the U.S. Attorney for the Southern District of New York
Furthermore, prosecutors have accused Mashinsky and Celsius’ former chief revenue officer, Roni Cohen-Pavon, of manipulating the value of CEL, the company’s native cryptocurrency token.
It is alleged that the duo orchestrated the purchase of hundreds of millions of dollars worth of CEL in the open market to artificially inflate and support the token’s price. As a result, Mashinsky reportedly profited approximately $42 million from the sale of CEL tokens, while Cohen-Pavon made over $3.6 million.
Adding to the gravity of the situation, leading up to June 12, 2022, when Celsius abruptly froze customer withdrawals, Mashinsky allegedly reassured customers about the company’s strong financial standing.
He claimed that Celsius had ample liquidity to fulfill all withdrawal demands. However, it is now alleged that Mashinsky had already removed around $8 million worth of his personal crypto assets from Celsius.
The U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission, and the Federal Trade Commission wasted no time and promptly filed lawsuits against Mashinsky and Celsius. These regulatory bodies aim to hold them accountable for their alleged fraudulent actions.
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The downfall of Celsius has been profound, as the lender had to seek Chapter 11 bankruptcy protection in July 2022. The company once considered a significant player in the cryptocurrency market, was compelled to freeze withdrawals due to the tumultuous crypto market conditions.
