Scammed Celsius Network Customers: Are They Going to Jail?

Crypto asset platform Celsius Network LLC and its former executives, Alexander Mashinsky and Roni Cohen-Pavon, are facing serious charges of securities fraud, commodities fraud and wire fraud. United States Attorney for the Southern District of New York Damian Williams and Acting Deputy Director of the FBI New York Field Office Christie M. Curtis made the announcement regarding the allegations.

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The indictment, which was made public in Manhattan federal court, accuses Mashinsky of intentionally misleading retail customers about Celsius Network's business and financial condition. The alleged intention was to gain the trust of customers and convince them to entrust their cryptocurrency assets to Celsius while using its services. Mashinsky allegedly exaggerated the risks associated with depositing crypto assets with Celsius while downplaying the security of Celsius's yield-generating activities, its profitability, and the reliability of its high reward rates.

The charges against Celsius Network founders Mashinsky and Cohen-Pavon suggest a long-term conspiracy to spread false information about the popularity and value of the company's native cryptocurrency token, CEL. It is alleged that Celsius was forced to spend hundreds of millions of dollars buying CEL on the open market in order to manipulate the company's stock price. During Mashinsky's tenure at Celsius, he and Cohen-Pavon, along with other suspected conspirators, allegedly used customer deposits to fund market purchases of CEL, artificially inflating its price.

Celsius Network, LLC has acknowledged its involvement in the fraud schemes and expressed its commitment to cooperate with the authorities. In fact, Celsius has entered into a non-prosecution agreement with the United States, signaling its acceptance of liability. The prosecutor's office took into account Celsius' Chapter 11 bankruptcy proceedings and its efforts to maximize victim recovery in the bankruptcy. The bureau also acknowledged the substantial improvement in cooperation from Celsius since the government brought certain production failures to its attention.

The case against Mashinsky is currently being heard by US Magistrate Judge Ona T. Wang, following his arrest. Meanwhile, Cohen-Pavon, who was born and raised in Israel, is currently in another country. Federal District Court Judge John G. Koeltl was appointed to preside over the case.

At the time Celsius announced it would halt all customer withdrawals on June 12, 2022, hundreds of thousands of Celsius customers, including many retail investors, had approximately $4.7 billion in assets cryptographics on the platform. On July 13, 2022, Celsius filed for Chapter 11 bankruptcy.

Celsius Network's journey from filing for bankruptcy to indictment took almost a year. Authorities conducted extensive investigations to determine why the platform failed and lost billions of dollars to investors who believed it was "the safest place for your crypto." ".

U.S. attorney Damian Williams pointed to the simple nature of the case, saying anyone who deceives ordinary investors to profit will be held accountable, whether it's traditional fraud or fraud. a sophisticated cryptography system. The message is clear: fraudulent activity will not go unnoticed or unpunished.

Acting FBI Deputy Director in Charge Christie M. Curtis pointed to Mashinsky and Cohen-Pavon's alleged involvement in complex financial schemes. The deliberate misrepresentation of Celsius Network's business model and manipulation of the value of its proprietary crypto token, CEL, are serious allegations. The Federal Bureau of Investigation is committed to prosecuting those responsible for misrepresenting a company's financial health in order to commit fraud.

In conclusion, the charges against Celsius Network LLC and its former executives underscore the vulnerability of the cryptocurrency market to fraud and scams. Investors are urged to exercise extreme caution when dealing with cryptocurrency and to conduct thorough due diligence. As the industry grows, it becomes increasingly important to establish regulations that protect investors and maintain market legitimacy.

First published on Bloomberg

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