Celsius Network Founder Pleads Not Guilty As Fraud Charges Mount In Multi-Billion Dollar

Key points:

• Celsius Network founder Alex Mashinsky pleads not guilty to fraud charges amid allegations of misleading customers and token value manipulation.
• Mashinsky faces multiple criminal counts while regulatory agencies file lawsuits against him and Celsius Network.
• Legal actions add to the ongoing scrutiny and challenges faced by the cryptocurrency industry.

According to Reuters, Alex Mashinsky, the founder and former CEO of bankrupt cryptocurrency lender Celsius Network, entered a plea of not guilty on Thursday in relation to fraud charges filed against him. The charges include securities fraud, commodities fraud, and wire fraud.

The indictment also accuses Mashinsky of misleading customers and artificially inflating the value of Celsius Network’s proprietary token. Alongside the criminal charges, several federal regulatory agencies have filed lawsuits against Mashinsky and Celsius Network.

The legal action against Mashinsky is the latest blow to the cryptocurrency industry, which has been grappling with the fallout from a decline in crypto prices that led to the collapse of several companies. Other prominent figures in the industry, including Sam Bankman-Fried of FTX, have also faced charges of fraud.

He appeared in federal court in Manhattan for his arraignment and was released on a $40 million bond secured by his residence in Manhattan.

Celsius Network, founded in 2017, filed for Chapter 11 bankruptcy protection in July 2022 following customer withdrawals as crypto prices plummeted. Many customers have faced difficulties accessing their funds.

The company’s collapse is part of a series of bankruptcies within the cryptocurrency sector as token prices declined due to rising interest rates and persistent inflation. Other companies, such as Three Arrows Capital and Voyager Digital, also filed for bankruptcy around the same time as Celsius Network.

In addition to the criminal charges, Mashinsky and Celsius Network’s former chief revenue officer, Roni Cohen-Pavon, were charged with market manipulation of the company’s token and fraudulent schemes related to the manipulation of the token’s price.

Alongside the criminal charges, regulatory agencies, including the U.S. Securities and Exchange Commission (SEC), have filed lawsuits against Mashinsky and Celsius Network. The SEC alleges that Mashinsky and the company raised billions of dollars through the sale of unregistered crypto securities and provided misleading information about the company’s financial state. The SEC claims that Celsius Network falsely presented itself as safe while engaging in risky practices and making uncollateralized loans.

The U.S. Commodity Futures Trading Commission and the Federal Trade Commission have also filed lawsuits against Celsius Network and Mashinsky. The FTC has reached a settlement with Celsius that includes a permanent ban on handling customers’ assets.

Celsius Network has been embroiled in a serious legal struggle. The company recently agreed to a $4.7 billion deal with US government officials on fraud claims.

This settlement, which is one of the biggest in FTC history, is likely to resolve the accusations against Celsius Network. The corporation, however, insists that the settlement will have no impact on its current restructuring efforts or the amount it hopes to collect for its consumers.

These developments contribute to the increasing regulatory scrutiny faced by the cryptocurrency industry, following lawsuits against major exchanges such as Binance and Coinbase.

However, in a separate case, Ripple Labs secured a victory when a federal judge ruled that the company did not violate federal securities law by selling its XRP token on public exchanges. The ruling led to a surge in the value of the cryptocurrency.

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