EX Celsius President captured, organization consents to pay $4.7 billion settlement

In a recent development, former Celsius CEO Alex Mashinsky was apprehended on Thursday due to federal securities fraud charges. According to a reliable source, the bankrupt cryptocurrency exchange has agreed to a substantial $4.7 billion settlement with government regulators.

Federal prosecutors have also levied charges of securities, commodities, and wire fraud against Mashinsky. Additionally, he faces various allegations of securities manipulation and fraud. If found guilty, Mashinsky, along with a co-defendant named Roni Cohen-Pavon, could potentially face lengthy prison sentences.

The charging document filed by federal prosecutors states that Mashinsky misrepresented multiple aspects, including the safety of Celsius's yield-generating activities, the company's profitability, the long-term sustainability of its high rewards rates, and the risks associated with depositing crypto assets with Celsius.

It is important to note that the settlement, recently announced by the FTC, will only be paid once the company is able to return the remaining customer assets during the ongoing bankruptcy proceedings.

Simultaneously, the SEC has initiated legal proceedings against Mashinsky and Celsius, echoing similar allegations made by the federal prosecutors. The SEC accuses Mashinsky of misleading investors and engaging in fraudulent manipulation of the price of Celsius' exchange token, CEL.

According to the SEC, Mashinsky and his company made false claims about the company's central business model and downplayed the risks to investors. They allegedly suggested that Celsius did not partake in risky trading practices and paid out a significant portion, though not all, of the company's revenue to investors.

However, the SEC asserts that none of these claims were true. In fact, Celsius reportedly encountered defaults worth "hundreds of millions of dollars" on its institutional loans.

Both the charging documents from New York federal prosecutors and the SEC complaint classify Celsius' exchange token as a security. The definition of a security and the SEC's regulatory authority over crypto markets have been fiercely debated by various crypto exchanges in recent months.

Earlier this year, Mashinsky was accused by New York prosecutors of orchestrating a fraudulent scheme amounting to $20 billion against investors. Prior to filing for bankruptcy in 2022, pervasive and long-standing issues plagued the crypto exchange, as previously reported by CNBC.