Former Celsius CEO arrested in New York, SEC files lawsuit

Alex Mashinsky, the former CEO of Celsius Network, a bankrupt crypto lender, has been arrested in New York, reports on July 13 show. The arrest follows an investigation into the collapse of the crypto firm in Q3 2022.

Mashinsky will be arraigned on Friday, July 14. However, people aware of the arrest reveal that the former CEO has denied any wrongdoing.

Following the arrest, the United States Securities and Exchange Commission (SEC) is also suing Celsius and the former CEO for allegedly providing false information to creditors and information and lying about the firm’s financial health.

Celsius was among prominent crypto firms collapsed last year. The crypto lender gained attention by offering high-interest rates on digital-asset deposits. However, following the TerraUSD stablecoin’s (UST) failure and a decline in crypto prices in 2022, Celsius found themselves in a financial hole and couldn’t meet customer withdrawal requests.

According to the SEC’s lawsuit, Mashinsky and Celsius made several false and misleading statements to investors, including claims of having adequate liquidity to fulfill customer obligations. The lawsuit also accuses Mashinsky and Celsius of self-dealing using customer funds to support the company’s cryptocurrency assets.

Celsius filed for bankruptcy protection in July 2022, which significantly impacted the crypto industry, eroding investor confidence and preceding the collapse of FTX, once a highly popular cryptocurrency exchange.

Following the collapse of the TerraUSD stablecoin (UST), Celsius’ financial positioned worsened as crypto prices continued to tank. Consequently, the company sought bankruptcy protection in July 2022.

Celsius is currently working on restructuring its debts to pay back its creditors. Creditors blame the bankrupt lender, accusing them of lying into investing because of false and misleading information about their overall liquidity.