A complaint has been filed in the U.S. District Court for the Southern District of New York against Alexander Mashinsky and Celsius Network, LLC, alleging fraud related to the operation of the Celsius digital asset platform. The Commodity Futures Trading Commission (CFTC) accuses Mashinsky and Celsius of making false claims about the safety and profitability of the platform to attract customer deposits.
The CFTC alleges that from 2018 through June 2022, Mashinsky and Celsius engaged in a scheme to defraud hundreds of thousands of customers. They are accused of misrepresenting Celsius as a “safe” alternative to traditional banking, promising high-yield interest payments on deposited digital assets. These assets were then pooled and used for loans and trading, including futures contracts, through the unregistered Celsius Pool.
The complaint further states that Celsius operated as an unregistered commodity pool operator (CPO) and Mashinsky acted as an unregistered associated person (AP) of a CPO. Customers deposited approximately $20 billion into the Celsius platform based on these promises.
While claiming to make “safe” investments, Mashinsky and Celsius allegedly engaged in increasingly risky trading strategies when they struggled to meet promised interest payments. Despite assertions of billions in liquidity in May 2022, Celsius halted customer withdrawals on June 12, 2022.
The CFTC has reached a settlement with Celsius Network, LLC, imposing a permanent injunction against future violations of the Commodity Exchange Act (CEA). However, the agency is continuing to pursue litigation against Mashinsky, seeking restitution, disgorgement, civil monetary penalties, and a permanent ban from trading and registration. The CFTC aims to enforce compliance with regulations in the rapidly evolving digital asset arena.
“Innovation does not equate to immunity from compliance with the law,” stated Ian McGinley, Director of Enforcement at the CFTC. “This case is the CFTC’s first against a digital asset lending platform, and it demonstrates the agency will not shy away from ensuring the law is enforced in the digital asset arena.”
Source: CFTC.gov
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