4 November 2021; Former Celsius Network CEO Alex Mashinsky, on Center Stage during day three of Web Summit 2021 at the Altice Arena in Lisbon, Portugal. Photo by Piaras Ó Mídheach/Web Summit via Sportsfile (Wiki commons)
Alex Mashinsky, the founder and former CEO of bankrupt Celsius Network, an Israeli fintech startup and cryptocurrency lender that once even had the coveted unicorn status with a billion plus valuation, was arrested in New York where U.S. officials are charging him with seven criminal counts. These include securities fraud, commodities fraud and wire fraud. And the company’s former chief revenue officer, Roni Cohen-Pavon, was charged with four criminal counts as well.
The two stand accused of, in effect, running a Ponzi scheme based around Celsius Network’s crypto token called Cel, putting them in the same class with Sam Bankman-Fried, the disgraced founder of crypto exchange FTX who has also been charged with similar crimes.
Celsius Network filed for bankruptcy one year ago. The filing came just after the firm was sued by someone who accused the firm of having run a Ponzi scheme.
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Jason Stone, who managed the KeyFi Inc investment fund together with Celsius Network, filed the lawsuit that accused the company of having defrauded him and of the “gross mismanagement of customer deposits.” Stone further alleges in his suit that he provided the company with services worth millions of dollars that it never paid out.
“Mashinsky portrayed Celsius as a modern-day bank, where customers could safely deposit crypto assets and earn interest. In truth, however, Mashinsky operated Celsius as a risky investment fund, taking in customer money under false and misleading pretenses,” reads the indictment.
Co-founded in 2017 by Israeli Daniel Leon, President and COO of Celsius, CEO Alex Mashinsky, and CTO Nuke Goldstein, Celsius Network hit a $3 billion valuation when it raised $400 million in new capital. But the company may have just been another house of cards as many in the crypto industry proved to be when the entire crypto market crashed recently.
The company says that its platform offers services that have been abandoned by traditional banks. These include “fair” interest, no fees, and speedy transactions. At one point it boasted over one billion users.
