Alex Mashinsky, founder and CEO of bankrupt cryptocurrency lender Celsius Network Limited, pleaded not guilty after being arrested in the U.S. Thursday for seven criminal charges including securities fraud, commodities fraud and wire fraud, Reuters reports.

See related article: Celsius misled investors, spent customer funds, bankruptcy examiner claims

Fast facts

  • U.S. federal prosecutors say Mashinsky defrauded customers. According to the indictment released Thursday by the U.S. Attorney for the Southern District of New York, Mashinsky led customers to believe that Celsius was an air-tight storage space for their assets, obscuring associated risks.
  • Additionally, prosecutors accuse Mashinsky and Celsius’ former chief revenue officer Roni Cohen-Pavon of manipulating the value of CEL, the company’s native cryptocurrency token. The two allegedly arranged the purchase of hundreds of millions of dollars of CEL in the open market with the objective of artificially supporting and inflating the token’s price.
  • Prosecutors allege that Mashinsky made approximately US$42 million in proceeds from his sales of CEL tokens, with Cohen-Pavon making over US$3.6 million.
  • In the lead up to June 12, 2022, when Celsius froze customer withdrawals, prosecutors say Mashinsky continued to assure customers that the company was in a strong financial position. He also informed them that the company had sufficient liquidity to meet all customer withdrawal demands. However, he had by that time allegedly removed approximately $8 million-worth of his own crypto assets from Celsius.
  • The U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission and the Federal Trade Commission all sued Mashinsky and Celsius earlier on Thursday.
  • Celsius filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York in July 2022 after the spiraling crypto market forced the lender to freeze withdrawals.

See related article: US court rules in favor of XRP in Ripple Labs case against SEC, with caveats