Alex Mashinsky, former CEO of Celsius Networks Ltd., leaves a courtroom in New York, United States, on Thursday, July 13, 2023.

Yuki Iwamura | Bloomberg | Getty Images

Former Celsius CEO Alex Mashinsky was arrested on federal securities fraud charges on Thursday as the bankrupt cryptocurrency exchange agreed to a $4.7 billion settlement with the Federal Trade Commission.

Celsius and Mashinski have also been indicted by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, alleging they conspired to defraud investors of billions of dollars.

Mashinski pleaded not guilty in Manhattan federal court to charges of securities, commodities and wire fraud, as well as various securities manipulation and fraud charges. If convicted, Mashinski and co-defendant Ronnie Cohen-Pavon face decades in prison.

Celeste’s settlement is one of the largest in the FTC’s history, coming close to a record $5 billion fine against Meta in 2019 and highlighting what the FTC called repeated deception by Celeste and Mashinsky.

The settlement announced by the FTC will not be paid until the company is able to return customer assets remaining in the bankruptcy process.

“Mashinski misrepresented the safety of Celsius’ revenue-generating activities, the profitability of Celsius, and the long-term sustainability of Celsius’ high rate of return,” U.S. Attorney Damian Williams’ office said in a charging document. sex and the risks associated with Celsius”. Deposit crypto assets in Celsius. “

XRP Soars After Court Victory With SEC, Former Celsius CEO Arrested: CNBC Crypto World

Concurrent SEC D Celsius and Mashinski are accused of misleading investors and fraudulently manipulating the price of Celsius’ trading token, CEL.

The SEC also alleges that they “misrepresented” the company’s “core business model and the risks to investors,” claiming that Celsius did not engage in high-risk transactions and paid out most, but not all, of the company’s revenue to investors.

The SEC asserted that “these claims are untrue.” For example, Celsius allegedly defaulted on institutional loans worth “hundreds of millions of dollars.”

Charge documents from federal prosecutors in New York and an indictment from the SEC also describe the Celsius exchange token as a security. The definition of a security and the SEC’s regulation of the cryptocurrency market has been hotly debated by other cryptocurrency exchanges in recent months.

“Alex vehemently denies the allegations made today,” Mashinski’s attorney, Jonathan Olin, told CNBC. “He looks forward to vigorously defending himself against these baseless allegations in court.”

Earlier this year, New York prosecutors charged Mashinski with orchestrating a $20 billion fraud against investors. CNBC previously reported on the widespread problems that plagued the cryptocurrency exchange for years before filing for bankruptcy in 2022.

Big Cryptocurrency Lender Files for Bankruptcy, Ex-Employee Says Company Mismanagement

— CNBC’s Jim Forkin contributed to this report.

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