A former CEO of now-defunct crypto company Celsius, Alex Mashinsky, was arrested on July 13 morning. The news comes minutes after the U.S. Securities and Exchange Commission filed a lawsuit against crypto lenders earlier in the day.
The former CEO was arrested following an investigation into the company's bankruptcy, Bloomberg reported, citing people familiar with the matter. The U.S. Department of Justice has charged Mr. Mashinsky with fraud and intent to manipulate the market.
Celsius Network filed for bankruptcy on July 14 last year. Mashinsky was recently convicted by investigators at the Commodity Futures Trading Commission, which concluded that the former CEO violated numerous U.S. regulations before the company's 2022 demise.
The investigation into the former CEO began after the New York Attorney General indicted Mr. Mashinsky on January 5. NYAG claimed the former CEO misled investors and caused billions of dollars in losses.
Celsius and its former CEO's troubles began last June when the crypto lender suddenly stopped making withdrawals on its platform. On June 16, 2022, five U.S. state securities regulators launched investigations into Celsius, and within a month the platform filed for bankruptcy.
Celsius suffered a massive cryptocurrency epidemic that led to the collapse of the Terra Luna ecosystem and the subsequent collapse of crypto hedge fund Three Arrow Capital, but a CFTC investigation found that Celsius and The former CEO was found to have violated several banking laws, misleading and lying.
The pandemic helped boost crypto lending platform Celsius' prominence in the 2021 bull market. The platform offered attractive interest rates for depositing digital assets, including double-digit interest rates. Mashinsky often touted these products as safer alternatives to those offered by traditional banks. However, the demise of Terra's algorithmic stablecoin UST and the downturn in the crypto market has had a terrible impact on business.
Mashinsky's arrest and lawsuit against Celsius come just months after the SEC's lawsuits against crypto exchanges Binance and Coinbase.