Business Markets News Report
July 06, 2023

CFTC Finds Celsius Network and Former CEO Alex Mashinsky Violated US Rules

In Brief

US regulators have increased their scrutiny of crypto firms, with the CFTC ruling that crypto lender Celsius Network and its former CEO Alex Mashinsky violated US rules before the company collapsed.

Crypto lender Celsius Network and its former CEO Alex Mashinsky have been found to have violated US rules by the Commodity Futures Trading Commission (CFTC) investigators. The CFTC could file a case in federal court within the month if the majority of the CFTC’s commissioners agree with the conclusions.

CFTC Finds Celsius Network and Former CEO Alex Mashinsky Violated US Rules

The collapse of Celsius Network has already resulted in legal action, with New York Attorney General Letitia James accusing Mashinsky of defrauding hundreds of thousands of investors out of billions of dollars. James alleged that Mashinsky made false statements about the platform’s safety and misrepresented the company’s financial condition. Mashinsky and his lawyers have sought to dismiss the charges, arguing that the lawsuit demonstrates a lack of understanding of Celsius’s business.

Celsius Network was founded in 2017 and experienced a surge in popularity during the pandemic, introducing loan offerings and attractive interest rates for virtual token deposits. However, the collapse of Terra‘s algorithmic stablecoin UST and a downturn in the crypto market led to disastrous consequences for the company. Despite strong denial of significant losses, Celsius encountered numerous customer withdrawals. In June 2022, they froze withdrawals and sought bankruptcy protection the following month.

The CFTC‘s action against Celsius comes as the agency has become increasingly involved in the crypto industry as of late. In March, the CFTC disclosed its lawsuit against Binance and its founder, Changpeng “CZ” Zhao. They alleged that Binance knowingly provided unregistered crypto derivative products in the US, violating laws. CFTC Chairman Rostin Behnam recently shared with lawmakers that the regulator has pursued over 85 digital asset market cases. These cases involve fraud and manipulation, resulting in over $4 billion in penalties and restitution.

Legal Action Following Celsius Collapse

The SEC has also filed lawsuits against Binance and Coinbase, the largest US crypto exchange. Both companies maintain their innocence. Moreover, the commission has taken enforcement action against crypto exchanges Kraken and Bittrex, as well as crypto lending platform Nexo so far this year.

The CFTC’s action against Celsius Network signifies growing regulatory scrutiny of crypto firms. Ex-CEO Alex Mashinsky is also involved. The CFTC claims authority over Bitcoin (BTC) and Ether (ETH). They consider these assets as commodities. The agency intervenes in cases of potential fraud or manipulation. CFTC’s investigations have led to significant consequences. The total sum of penalties and restitution exceeds $4 billion. This underlines the severity of the issue.

  • Celsius Network’s decision to disable withdrawals, swaps, and transfers from its platform caused its native token CEL to lose up to half of its value.

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About The Author

Nik is an accomplished analyst and writer at Metaverse Post, specializing in delivering cutting-edge insights into the fast-paced world of technology, with a particular emphasis on AI/ML, XR, VR, on-chain analytics, and blockchain development. His articles engage and inform a diverse audience, helping them stay ahead of the technological curve. Possessing a Master's degree in Economics and Management, Nik has a solid grasp of the nuances of the business world and its intersection with emergent technologies.

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Nik Asti
Nik Asti

Nik is an accomplished analyst and writer at Metaverse Post, specializing in delivering cutting-edge insights into the fast-paced world of technology, with a particular emphasis on AI/ML, XR, VR, on-chain analytics, and blockchain development. His articles engage and inform a diverse audience, helping them stay ahead of the technological curve. Possessing a Master's degree in Economics and Management, Nik has a solid grasp of the nuances of the business world and its intersection with emergent technologies.

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