Celsius has been accused by many parties of being trapped in a legal whirlpool. This article sorts out the details of the accusations

Originally written by Karen, Foresight News

On Thursday, Celsius and its former CEO Alex Mashinsky were charged by the US Securities and Exchange Commission (SEC), the US Department of Justice (DOJ), the US Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC). Meanwhile, Alex Mashinsky was arrested on Thursday morning local time, Bloomberg reported citing people familiar with the matter.

Last year, since the de-anchoring of UST, funds began to withdraw from Celsius at an accelerated rate. In order to cope with withdrawals and obtain liquidity, on the one hand, Celsius sold assets such as BTC and ETH on a large scale, and on the other hand mortgaged assets through DeFi agreements such as AAVE and Compound. Stablecoins such as USDC. However, the de-anchoring of stETH and the continued decline in the prices of ETH and BTC forced it to increase asset collateral, while the constant demand for withdrawals would reduce its current assets.

On June 13, 2022, Celsius suspended all account withdrawals, transactions and transfers. Afterwards, Celsius said it would explore the possibility of seeking strategic transactions and debt restructuring while stabilizing liquidity and operations. In mid-July 2022, Celsius filed for bankruptcy in order to maximize value for all stakeholders.

Foresight News summarizes and collates the details of allegations against Celsius by SEC, DOJ, CFTC and FTC, so that readers can understand the allegations against Celsius and the rulings requested by government agencies that supervise the US securities and futures markets and safeguard the implementation of laws.

DOJ sues Celsius

Acting Assistant Director of the FBI's New York Office, Curtis, announced the unsealed indictment charging Celsius Network LLC founder and former CEO Alex Mashinsky and its subsidiary-affiliated entities with securities fraud, commodities fraud and wire transfers, according to documents released by the U.S. Department of Justice fraud. The allegations allege that Alex Mashinsky organized a fraudulent scheme designed to defraud Celsius' customers and inflate CEL prices by repeatedly making misleading and false statements to mislead customers about core aspects of Celsius' business, including Celsius' success and profitability and the nature of investments Celsius makes with client money.

And Alex Mashinsky personally made about $42 million from the sale of CEL, and Celsius CMO Roni Cohen-Pavon made at least $3.6 million from the sale of CEL.

Alex Mashinsky indicted on seven counts of securities fraud, commodity fraud, wire fraud, conspiracy to manipulate CEL prices, scheme to manipulate CEL prices, CEL market manipulation, wire fraud against CEL, and Roni Cohen-Pavon charged with conspiracy to manipulate CEL prices , fraudulent scheme to manipulate CEL prices, CEL market manipulation, and wire transfer fraud against CEL. The graph below shows the maximum penalty faced by the accused. (Reminder: The charges in the indictment are only allegations, and defendants are presumed innocent until proven guilty.)

U.S. Attorney Williams also announced that the U.S. had entered into a non-prosecution agreement with Celsius, under which Celsius agreed to accept responsibility for its role in the fraudulent scheme.

US SEC sues Celsius

The U.S. Securities and Exchange Commission (SEC) filed a lawsuit in the U.S. District Court for the Southern District of New York against CELSIUS NETWORK LIMITED (Celsius Network) and Alex Mashinsky, the former CEO of Celsius, as the plaintiff.

In the 51-page complaint issued by the US SEC, 299 paragraphs were used to detail the "criminal evidence" of Celsius and Alex Mashinsky during the platform development process of Celsius from its establishment in 2018 to June 2022, including through unregistered and fraudulent securities asset issuance and sales, raised billions of dollars from investors, and then promised investors a high return of up to 17% through the "Earn Interest Program" plan, and prevented investors from withdrawing data from the platform by manipulating the price of CEL tokens. Billion dollars in crypto assets.

Notably, the SEC directly described CEL as Celsius’s own crypto asset security, and said Celsius also claimed that the company’s liabilities exceeded its assets by approximately $1.2 billion a month after filing for bankruptcy.

The SEC complaint also alleges that Celsius repeatedly falsely claimed it had raised $50 million in its ICO offering, when in fact it only raised about $35 million.

The US SEC believes that Celsius violated multiple fraudulent provisions of the Securities Act and the Exchange Act, as well as conducted unregistered securities offerings and sales, and hopes that the court will make the following rulings or orders against the defendant:

• Finds the defendant guilty of the alleged violations;
• Permanently restrain and prohibit Defendants from engaging in violations of: Sections 5(a), 5(c), and 17(a) of the Securities Act [15 USC § 77 e(a), 77 e(c), 77 q(a)], Sections 9(a)(2) and 10(b) of the Exchange Act [15 USC § 78 i(a)(2), 78 j(b)], and 10(b) thereof -5 titles [17 CFR § 240.10 b-5];
• Permanently bar defendant Alex Mashinsky from registering securities pursuant to Section 12 of the Exchange Act pursuant to Section 20(e) of the Securities Act and Section 21(d)(2) of the Exchange Act or from An officer or director of any issuer of securities filing a report under Section 15(d) of the Act;
• Pursuant to Section 20(b) of the Securities Act and Sections 21(d)(1) and 21(d)(5) of the Exchange Act, Defendants are permanently barred from directly or indirectly participating in the purchase, offering, or sale of any cryptoasset securities, or engage in activities that induce or attempt to induce others to buy, offer or sell any crypto asset securities;
• Pursuant to Section 21(d)(3), (5) and (7) of the Exchange Act, Defendant Alex Mashinsky is ordered to surrender any undue proceeds obtained from the illegal conduct alleged in this complaint and to pay the judgment pre-interest;
• Order the defendant to pay a civil penalty under Section 20(d) of the Securities Act and Section 21(d) of the Exchange Act, in an amount to be determined by the court;
• Order such other adjudicative action as the court deems just, equitable, and appropriate with regard to the enforcement of the federal securities laws and the protection of investors.

US FTC sues Celsius

CELSIUS NETWORK INC., CELSIUS NETWORK LLC, CELSIUS NETWORKS LENDING LLC, CELSIUS KEYFI LLC, CELSIUS MINING LLC, CELSIUS US HOLDING LLC, CELSIUS NETWORK INC. US LLC, CELSIUS MANAGEMENT CORP., along with Alex Mashinsky (Former CEO of Celsius), Shlomi Daniel Leon (Co-Founder and Chief Strategy Officer of Celsius) and Nuke Goldstein (CTO of Celsius).

The FTC claims in the lawsuit that “from at least June 19 to June 2022, Defendants deceived consumers into transferring their cryptocurrency assets to the Celsius platform, falsely claiming that their deposits were safe and promising to provide them in a “risk-free” manner. Consumers make profits and also guarantee to maintain sufficient reserves for customers to withdraw the currency at any time, because Celsius has "billions of dollars in liquidity", but in fact, the defendants squandered consumers' deposits, including making unsecured and Unsecured loans, did not maintain sufficient liquid funds, and Celsius even claimed that it was a safe alternative to the banking industry.” The FTC also addressed false representations made by defendants in business.

Accordingly, the FTC finds that the defendants' practices and conduct violated the FTC Act and the Gramm-Leach-Bliley (GLB Act) and constituted an act of fiction, fraud, deceit, etc., and seeks and orders monetary damages, preliminary and permanent injunctions and other compensation. The FTC said the defendants’ violations were related to the sale and sale of cryptocurrency loans and custodial services.

The FTC believes that consumers are suffering, have suffered, and will continue to suffer significant damages, and that if the court does not grant an injunction, the defendants are likely to continue to harm consumers and harm the public interest. Accordingly, the FTC is asking the court to:

• Issue a permanent injunction to prevent future violations of the FTC Act and the GLB Act;
• the grant of a preliminary injunction and ancillary relief, which is the possibility of avoiding injury to consumers during the termination of this action and preserving the possibility of effective final relief;
• award monetary and other compensation to the extent authorized by the court;
• Award any additional compensation that the court deems just and appropriate.

In a press release issued after the filing of the lawsuit, the FTC claimed that the FTC reached a settlement with Celsius, permanently banning the platform from handling consumer assets and accusing three former executives of defrauding consumers by falsely promising that deposits are safe and readily available. Those who transfer cryptocurrencies to the platform. The companies also agreed to a $4.7 billion judgment that will be suspended to allow Celsius to return remaining assets to consumers during bankruptcy proceedings.

However, former Celsius CEO Alexander Mashinsky and Celsius co-founders Shlomi Daniel Leon and Hanoch Nuke Goldstein did not agree to the settlement, and the FTC's case against them will continue in federal court.

US CFTC sues Celsius

Blockworks said that according to the CFTC’s lawsuit, Celsius “as an unregistered commodity pool operator for the Celsius Pool, solicited, accepted, and received assets for the purpose of trading in commodity interests; and Alex Mashinsky acted as an unregistered affiliate of the CPO to solicit The public contributes money to Celsius Pool. In order to achieve the returns promised to customers, Celsius has adopted a very risky investment strategy, including extending millions of dollars in unsecured loans and millions of dollars in unregulated, high-risk DeFi protocols .