The former CEO of Celsius, Alex Mashinsky, and the company’s chief revenue officer, Roni Cohen-Pavon, have been arrested on charges of securities fraud. According to Bloomberg, the Justice Department has unsealed charges against Mashinsky and Cohen-Pavon for allegedly inflating the price of Celsius’ crypto token, CEL, while deceiving customers about the token, their activities, and the company’s overall health.
The Department of Justice claims that Mashinsky and Cohen-Pavon manipulated the price of CEL, causing investors to buy the token at inflated prices. The DOJ alleges that even as Mashinsky assured Celsius customers that he wasn’t selling his tokens, he actually made $42 million from selling them, while Cohen-Pavon made $3.6 million.
One piece of evidence presented by the DOJ is a WhatsApp conversation from October 2021. In this conversation, Cohen-Pavon responds to Mashinsky’s complaints about the decreasing price of CEL despite new users joining Celsius. Cohen-Pavon states that the main problem is that people are selling the token, while no one is buying except for Celsius. He acknowledges that the value of CEL was fake and based on Celsius spending millions of dollars to artificially maintain its price. Prosecutors argue that this conversation demonstrates the defendants’ awareness of the fraudulent nature of their actions.
In response to Cohen-Pavon’s remarks, Mashinsky mentions other popular tokens like Doge Coin and $SB for Solana, implying that their values are also based on speculation. This statement further suggests that Mashinsky was fully aware of the deceptive practices employed by Celsius.
Prosecutors also accuse Mashinsky and Cohen-Pavon of misleading customers by portraying Celsius as a safe place to store crypto assets and earn interest. However, the DOJ claims that Mashinsky actually operated Celsius as a risky investment fund, taking customer money under false pretenses.
The Federal Trade Commission (FTC) has proposed a settlement with Celsius, accusing the company of engaging in deceptive and unfair acts. Under the settlement, Celsius would be fined $4.7 billion and Mashinsky, along with two former executives, would be held accountable for tricking consumers into believing their assets would be safe and always available. The settlement also prohibits Celsius from handling customer assets.
Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, stated that Celsius touted a new business model but engaged in an old-fashioned swindle. He emphasized that today’s action sends a clear message that emerging technologies are not exempt from the law.
The arrests of Mashinsky and Cohen-Pavon highlight the need for regulatory oversight in the cryptocurrency industry. As cryptocurrencies gain popularity and attract more investors, it becomes crucial to ensure transparency and protect consumers from fraudulent activities. The case against Celsius serves as a reminder that individuals and companies operating in the crypto space will be held accountable for their actions.
It is essential for investors to conduct thorough research and exercise caution when engaging with crypto platforms. Regulatory bodies, such as the FTC and the Securities and Exchange Commission (SEC), play a vital role in maintaining the integrity of the market and protecting investors. By enforcing laws and pursuing legal action against fraudulent actors, these agencies aim to foster trust and confidence in the cryptocurrency industry.
The outcome of the charges against Mashinsky and Cohen-Pavon will have significant implications for the future of Celsius and the wider crypto ecosystem. It serves as a warning to others who may be engaging in similar fraudulent activities and emphasizes the importance of ethical behavior within the industry.
Moving forward, it is crucial for regulators, industry participants, and investors to work together to establish a robust framework that ensures transparency, consumer protection, and the integrity of the cryptocurrency market. By addressing issues of fraud and deception, the industry can grow in a sustainable and responsible manner, fostering trust and confidence among investors.
The case against Mashinsky, Cohen-Pavon, and Celsius serves as a reminder that no one is above the law, regardless of the type of technology or industry they operate in. As cryptocurrencies continue to evolve, it is imperative to ensure that appropriate regulatory measures are in place to protect investors and maintain the integrity of the market.
