Celsius founder Alex Mashinsky was arrested in the U.S. last week, charged with seven criminal counts including securities fraud, commodities fraud and wire fraud. (He pleaded not guilty.)
Prosecutors say that Mashinsky misled Celsius customers about how safe their funds were and artificially inflated the value of company’s cryptocurrency, Cel.
Celsius was one of the biggest crypto lenders, offering customers ultra-high returns on cryptocurrency deposits, which were then loaned out to other investors. The SEC, which along with other regulatory agencies filed a lawsuit on the same day last week, said that Celsius took increasingly risky steps to deliver the returns. Then, when crypto prices fell last year, customers rushed to withdraw their money and the whole thing collapsed.
The indictment said that Mashinsky made so many false and misleading statements during his weekly customer Q&A sessions that Celsius employees would at times have to edit them out of the recordings before uploading them to YouTube.
From selling his holdings of the Cel token, Mashinsky personally pocketed approximately $42 million, while former chief revenue officer Roni Cohen-Pavon netted $3.6 million, the indictment said. The people who trusted Celsius were left with huge losses.
Meanwhile, Ripple Labs scored a landmark win against the SEC in their long-running legal battle over Ripple’s XRP token, as a judge ruled that it wasn’t a security when it was sold on public exchanges. (More details in this article.)
XRP soared as exchanges re-listed it and the broader crypto market enjoyed a termporary rally as supporters interpreted it as a sign that other disputed tokens would also not count as securities.
But it’s not that simple: the judge ruled that XRP does count as a security in some circumstances, and that Ripple broke securities law when it sold it directly to sophisticated institutional investors. So, it’s a part-victory for the SEC and a part-victory for Ripple. The decision is specific to Ripple’s individual case and not about cryptocurrencies in general.
Still, the ruling is likely to give ammunition to other crypto firms who are battling with the SEC over whether their products count as securities.
Click here for an explanation of what makes a crypto asset a security in the U.S., and here for more on how crypto firms might use the ruling.
