Celsius Network and Alex Mashinsky face SEC fraud accusations

The SEC has gone after yet another crypto-based firm, namely Celsius Network.

The US Security Board has charged the crypto lender firm and its founder, Alex Mashinsky, with fraud. According to the official report by the SEC, the former CEO violated the anti-fraud and registration provisions of the federal securities law.

Alex Mashinsky and Celsius Network failed to register the offering and sales of Celsius’s crypto lending product called the Earn Interest Program. 

Moreover, the Securities and Exchange Commission has charged the company with making misleading and false statements to the investors in the program. The charges also cover Celsius’s crypto security, called CEL, along with its market manipulation.

The first part of the SEC’s charges states that ever since its inception in 2018, Celsius has been offering its Earn Interest Program. The program allowed investors to tender their crypto assets to the platform to earn interest.

Despite the fact that the program constituted the offering and sale of securities under federal law, Celsius Network did not file a registration for it. That is why the program lacks any protection against registration.

The second part of the charges states that Mashinsky and Celsius Network have repeatedly misrepresented key aspects of the Earn Interest Program. It includes making misleading and false statements about business and trading strategies, Celsius’s business model, risks, the security of customers’ assets, and its financial success.

Finally, the SEC has also claimed that the former CEO and Celsius Network have manipulated the CEL market. Starting in 2020, the founder engaged in fraudulent activities to artificially boost the price of CEL.

This was accomplished by manipulating CEL buybacks in excess of publicly reported purchases. The founder, the largest CEL holder after Celsius, devised a plan to have the greatest impact on the CEL market.

Celsius has been reported to cooperate with the US Securities Board and has even agreed to the relief mentioned in the charges. It includes a permanent injunction against every future securities law violation.

Seeing how Ripple Labs has pulled off a miraculous win against the SEC, Celsius Network might still have some hope in the case.