Federal prosecutors have announced that Alex Mashinsky, the founder and former CEO of bankrupt cryptocurrency firm Celsius, was arrested Thursday and charged with fraud.
Mashinsky has also been sued by the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Trade Commission. Under the settlement with the FTC, Celsius agreed to pay $4.7 billion in damages to its customers, but the full payment process was suspended while the bankruptcy proceeded.
Mashinsky was arrested at his New York home, according to investigative sources. The charges against him include wire fraud, commodity fraud and stock price manipulation.
Before it went bankrupt last year, Celsius made a name for itself as a kind of crypto bank that promised its customers very high interest rates and handled tens of billions of dollars in deposits. As a charismatic seller, Mashinsky appeared in a YouTube video claiming Celsior is a safer and more equitable alternative to traditional banks.
At its peak, Celsius managed about $25 billion in crypto assets. But last summer, amid the widespread collapse of the cryptocurrency market, Celsius collapsed and filed for bankruptcy. It hit more than half a million customers in the process, many of whom lost their savings.
Authorities said the company and Mr. Mashinsky repeatedly lied to investors about their business model and how they make money. He also lied about the number of customers and misrepresented investors that their deposits were guaranteed.
