Breaking: Celsius Network fined $4.7B by FTC

The regulator said Celsius “squandered billions in user deposits” after “duping” customers into depositing funds.

The United States Federal Trade Commission has issued a $4.7-billion fine against bankrupt crypto lender Celsius Network. However, the judgement will be suspended to “permit Celsius to return its remaining assets to consumers in bankruptcy proceedings.”

According to the July 13 announcement, Celsius and its affiliate companies will be permanently banned from “offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets.”

The New Jersey-based firm marketed a variety of cryptocurrency products and services to consumers, such as interest-bearing accounts, personal loans secured by their cryptocurrency deposits and a cryptocurrency exchange. In its complaint, the FTC alleged that co-founders Alex Mashinsky, Shlomi Leon and Hanoch Goldstein marketed the platform as a “safe place” for consumers to deposit their cryptocurrency while misappropriating over $4 billion in consumers’ assets. The co-founders have not agreed to a FTC settlement and the case against them will proceed to federal court. 

In addition, the FTC accused Celsius of making $1.2 billion in unsecured loans, falsely stating that it had a $750-million user insurance policy and lacking any means of tracking its assets and liabilities until late-2021. Even during the onset of the 2022 cryptocurrency bear market, executives allegedly lied about the well-being of the company, as told by the FTC:

“While lying to their customers to keep them from withdrawing their cryptocurrency deposits, Leon, Goldstein, and Mashinsky protected themselves by withdrawing significant sums of cryptocurrency from Celsius two months before the company filed for bankruptcy. Consumers subsequently lost access to their life savings, college funds, and money saved for retirement.”

The same day, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission also filed lawsuits against Celsius. At the same time, Mashinsky was indicted on seven fraud-related charges by the U.S. Department of Justice and was subsequently taken into custody. Celsius previously filed for bankruptcy last July.

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