The US Federal Trade Commission (FTC) imposed a multi-billion dollar fine on embattled crypto lenders. The regulator alleges Celsius wasted billions after successfully duping clients into depositing the funds.
The regulator claims that Celsius Network misappropriated billions of digital wealth owed to the clients. Consequently, FTC issued the $4.7 billion fine against Celsius when it was actively involved in bankruptcy proceedings following its collapse in mid-2022.
FTC Suspends Billion-Dollar Fine Issued to Celsius Network
FTC suspended the billion-dollar fine from enforcement to allow Celsius Network to hand over the remaining assets to the consumers in the fulfillment of the ongoing bankruptcy proceedings.
The Thursday, July 13 statement captures a permanent injunction against Celsius and the affiliates. The FTC prohibits Celsius and its affiliates from ever executing, marketing, or promoting services and products parties could use to deposit, invest, or withdraw any asset class’s assets.
The FTC observed that the New Jersey-headquartered firm offered unsuspecting clients a diversified portfolio of crypto products and services. In particular, it offered interest-bearing accounts, crypto exchange, and loans advanced against crypto deposits.
Deceptive Executives Duped Customers to Facilitate Secretive Withdrawal
The FTC complaint accused three Celsius founders of promoting the company as a safe platform that customers could trust and deposit crypto. FTC accuses the co-founders, Hanoch Goldstein, Shlomi Leon, and Alex Mashinsky, of misappropriating customers’ deposits estimated to exceed $4 billion. At the time of writing, the co-founders are yet to issue comments or agree to the FTC settlement. The situation will prompt the case to the Federal Court for hearing and determination.
The FTC alleged that Celsius initiated $1.2 billion in unsecured loans by falsely claiming the platform would use $750 million insurance cover. The regulator submitted that the platform operated without deploying a mechanism to track the assets and obligations until the 2021 last quarter.
The FTC submitted that Celsius executives sustained the lie even at the onset of the crypto bear market in 2022. The three executives misrepresented the well-being of the entity.
FTC observed that the executives deceived the customers to reconsider not withdrawing their crypto deposits. At this time, Leon, Mashinsky, and Goldstein would secretly offload substantial sums of cryptos. They withdrew the sums two months before filing for bankruptcy. The executives’ deceptive conduct cost consumers invaluable life savings, retirement benefits, and college funds.
US Regulators Initiate a Stream of Lawsuit Against Celsius Network and Executives
The FTC pronouncement of the $4.7 billion fine coincides with the arrest of former Celsius chief Mashinsky. The US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) would differently prefer charges against Celsius.
Besides apprehension, Mashinsky was charged with seven fraud-related counts by the US Department of Justice (DOJ). The actions undertaken by various regulators give the ongoing bankruptcy proceedings a sudden twist days after Celsius filed an adversary complaint against StakeHound for failing to hand over crypto assets valued at $150 million.
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