Celsius Founder Charged With Fraud

Charges against Machinsky include making false and misleading representations, manipulating the market, and offering and selling unregistered crypto asset securities through Celsius’ loan program.

The SEC’s complaint says that almost from the company’s founding inception in 2018 until it stopped withdrawals in June 2022, Celsius promoted an Earn Interest Program, where users deposited their crypto assets in exchange for interest. The regulator says although the Earn Interest Program constituted the offer and sale of securities under the federal securities laws, no registration was filed or in effect for the offering, and no exemption from registration was available.

SEC: Celsius Made "False and Misleading Statements"

The complaint also alleges that Celsius and Mashinsky continuously misrepresented fundamental elements of the company’s operations to Earn Interest Program and CEL (the native token of the Celsius Network) investors throughout its operating period. This included making false and misleading claims about the company’s trading and business strategies, risks, its business model, its financial health and success, and the security of customer assets on its platform.

CEL Market Manipulation

Also alleged is that Mashinsky and Celsius manipulated the market of CEL. As far back as 2020, the SEC says there was an ongoing fraud to increase the CEL price of CEL through buy backs in excess of publicly disclosed purchases. As the single largest holder of CEL (aside from Celsius the company) the SEC says the scheme was designed to encourage the market to buy CEL, for the ultimate benefit of Celsius and Mashinsky.

“Celsius lied to investors by presenting itself as a safe investment opportunity and a chance to gain financial freedom, but, behind the scenes, the company operated a failing business model and took significant risks with investors’ crypto assets. Thousands of retail investors have experienced significant financial hardship as a result of Celsius’s and Mashinsky’s illegal conduct, and today we are holding Celsius and Mashinsky responsible for defrauding thousands of retail investors.” – Gurbir S. Grewal, Director of the SEC’s Enforcement Division.

The SEC says Celsius is cooperating and has consented to the relief requested in the complaint, which includes a permanent injunction against future securities law violations. Celsius and Mashinsky have also been charged by the Commodity Futures Trading Commission (CFTC).