US FTC Imposed Trading Ban and $4.7 Billion Fine on Bankrupt Celsius

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Key takeaways:

  • The US FTC has fined the bankrupt Celsius Network $4.7 billion.
  • According to the FTC, the co-founders of the website misused more than $4 billion in consumer assets while promoting it. 

The US Federal Trade Commission (FTC) has fined the insolvent cryptocurrency lender Celsius Network $4.7 billion.

The announcement that was made on July 13 states that any product or service that might be used to deposit, swap, invest, or withdraw any assets will no longer be offered, marketed, or promoted by Celsius and its affiliated firms. Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, said:

“Today’s action banning Celsius from handling people’s money and holding its executives accountable should make clear that emerging technologies are not above the law.”

The company, which had its headquarters in New Jersey, offered customers a range of cryptocurrency goods and services, including interest-bearing accounts, personal loans backed by customers’ bitcoin deposits, and a cryptocurrency exchange.

The FTC complained that platform co-founders Alex Mashinsky, Shlomi Leon, and Hanoch Goldstein misappropriated more than $4 billion in consumer assets while marketing the platform as a “safe place” for users to deposit their cryptocurrencies.

The FTC also charged Celsius with making $1.2 billion in unsecured loans, lying about having a user insurance policy worth $750 million, and not having any way to track its assets and liabilities until late 2021. Officials allegedly lied about the company’s state even as the bear market in cryptocurrencies in 2022 was just getting started, according to 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 Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC) filed cases against Celsius on the same day. Mashinsky was arrested after being indicted by the US Department of Justice on seven fraud-related offenses simultaneously.

The Southern District of New York Office of the US Attorney will host a press conference to discuss the indictment on Thursday at 11:30 a.m. Eastern Time.

A significant $2 billion claim has recently been made by Celsius Network against FTX, a well-known cryptocurrency exchange run by Alameda, in addition to the legal actions. Additionally, StakeHound, a staking platform, was accused by Celsius Network of withholding funds that had been given to it while it was in bankruptcy. 

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