Celsius Network accused of falsely promising secure cryptocurrency platform
In a recent regulatory crackdown, the Federal Trade Commission (FTC) has announced a settlement with the bankrupt cryptocurrency platform, Celsius Network, along with charging three of its former executives with fraud. The FTC’s Bureau of Consumer Protection Director, Samuel Levine, explained that Celsius and its ex-CEO Alexander Mashinsky, along with co-founders Shlomi Daniel Leon and Hanoch “Nuke” Goldstein, swindled consumers by falsely promising a secure and always accessible platform for their cryptocurrency deposits.
In the proposed settlement, Celsius and its affiliates would be permanently barred from offering any asset-related services, and they have agreed to a suspended judgement of $4.7 billion to enable the return of remaining assets to consumers during the bankruptcy proceedings. However, the former executives have not agreed to a settlement, and the FTC’s case against them will proceed in court.
Previously, Celsius, which filed for bankruptcy in July 2022, marketed itself as a safe platform for cryptocurrency deposits, offering various products such as interest-bearing accounts and personal loans secured by cryptocurrency deposits. But according to the FTC, Celsius and its executives deceived customers by not only promising, but failing to deliver the high return rates they advertised.
The FTC has further accused the company of misappropriating more than $4 billion in customer deposits to fund its operations, high-risk investments, and unsecured loans, despite the company’s claims to the contrary. The FTC also alleges that Celsius failed to deliver the high returns they promised, with most participants receiving much less than promised. As its financial health declined, the company’s top executives hid this information, misleadingly assuring customers their deposits were safe.
In addition to the permanent ban on asset handling for Celsius and its affiliates, the proposed settlement stipulates that the companies must not make any false representations about the benefits of their products or services or disclose any nonpublic personal information about consumers without express consent.
The FTC complaint against the Celsius Network, Leon, Goldstein, and Mashinsky was filed in the U.S. District Court for the Southern District of New York. The staff attorneys from the FTC’s Bureau of Consumer Protection leading this matter are Katherine Aizpuru, Katherine Worthman, and Stephanie Liebner.
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