Celsius founders to pay $16.5M to settle FTC fraud charges

Source: Banking Dive, an Industry Dive publication Author: Gabrielle Saulsbery

Three former Celsius Network executives must pay $16.5 million to resolve Federal Trade Commission (FTC) charges that they deceived users by promising that deposits with the company would be safe and always available.

Alex Mashinsky, Shlomi Daniel Leon, and Hanoch Goldstein co-founded the now-defunct cryptocurrency platform in 2017. The company filed for bankruptcy in 2022.

FTC Bans and Penalties

The FTC announced Monday that each executive has agreed to bans:

• Mashinsky and Leon are banned from marketing or selling products or services used to deposit, exchange, invest, or withdraw assets.
• Goldstein is banned from marketing or selling products or services used to buy, sell, or trade cryptocurrency.

Allegations of Deception

In 2023, the FTC alleged that Celsius and its co-founders made false promises to customers, including claims that:

• The platform was "safer" than a bank.
• It maintained a $750 million insurance policy for deposits.
• It held sufficient reserves.
• Users of its Earn product could yield as much as 18% interest annually.

According to the FTC, these promises were false, and the founders continued to mislead customers within days of Celsius filing for bankruptcy.

In a previously reported but now unavailable YouTube livestream, Mashinsky stated:

"Celsius has billions in liquidity, right, and we provide immediate access to everybody."

He suggested that critics were being funded by competing firms. However, three days later, the exchange paused withdrawals and filed for bankruptcy, citing "extreme market conditions."

Penalty Distribution

• Alex Mashinsky will pay $10 million — the largest share.
• Shlomi Daniel Leon will pay $4.1 million.
• Hanoch Goldstein will pay $2.4 million.

Mashinsky and Leon are also prohibited from disclosing nonpublic personal information about consumers unless the user provides express informed consent.

Mashinsky's Legal Status

Mashinsky pleaded guilty to commodities fraud and intent to manipulate the value of the Celsius token in 2024. He was sentenced to 12 years in prison last year and is currently serving his sentence at Otisville Correctional Facility in New York.

Last month, Mashinsky filed to vacate his sentence, citing:

• Ineffective counsel
• "Fruit of the poisonous tree" legal doctrine (which holds that evidence derived from illegally obtained evidence is inadmissible in court)
• Inappropriately applied statute and regulatory understanding
• Inappropriately applied legal theories
• Deprivation of due process

His filing was handwritten.

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