Just over a week ago, a confidential source from within the CFTC stated that the regulator had arrived at the conclusion that Celsius and its CEO, Alex Mashinsky, had violated US law.
At the time, the source was unable to confirm when or whether a lawsuit against the platform and its leadership would be filed.
Celsius Settles, C-suite Does Not
Mashinsky has since been reportedly arrestedand the FTC has officially filed a complaint against those involved.
It’s worth noting that the FTC (Federal Trade Commission) and the CFTC (Commodity Futures Trading Commission) are two distinct and separate regulators. However, the two closely cooperate and share privileged information between themselves. Therefore, it’s possible that the CFTC simply decided that this would be a matter more suited for the FTC to take care of and thus turned its findings over.
According to a press release submitted by the FTC on July 13, Celsius Network has already reached a settlement with the regulator, promising to pay penalties worth $4.7 billion.
There is, however, a catch to this deal. Payment of the fine will be suspended in order to allow Celsius to repay creditors. This deal is based on current financial statements provided by Celsius and also warns the indebted platform that any additional funds found in excess of the sum needed to pay off creditors will be confiscated.
“The suspension will be lifted as to Non-Debtor Defendants if, upon motion by the Commission or the Commission, the Court finds that a Non-Debtor Defendant failed to disclose any material asset […]. The suspension will be lifted as to Corporate Defendants if the Bankruptcy Case is closed, dismissed, or otherwise concluded. […]. f the suspension of the judgment is lifted, the judgment becomes immediately due as to Corporate Defendants in the amount specified in Subsection A.”
Although this decision should conclude the saga as far as Celsius is concerned, the founders of the platform did not take the deal they were offered and will now be sued in federal court.
Banned From Handling Consumer Funds
According to Samuel Levine, the director of the Consumer Protection division of the FTC, Alex Mashinsky and his co-founders Shlomi Daniel Leon and Hanoch Goldstein swindled customers out of their hard-earned money and will now face the consequences of their actions.
“Celsius touted a new business model but engaged in an old-fashioned swindle. Today’s action banning Celsius from handling people’s money and holding its executives accountable should make clear that emerging technologies are not above the law.”
Celsius and all business entities that were under its control are also henceforth banned from handling customer deposits.
The three executives named in the press release will be sued in the US District Court for the Southern District of New York.