(HedgeCo.Net) Charges include the unregistered offer and sale of crypto asset securities through Celsius’s lending program, making false and misleading statements, and engaging in market manipulation.
The Securities and Exchange Commission has charged Celsius Network Limited (Celsius) and its founder and former CEO, Alex Mashinsky, for violating registration and anti-fraud provisions of the federal securities laws, including by failing to register the offers and sales of Celsius’s crypto lending product, the Earn Interest Program; making false and misleading statements to investors of the Earn Interest Program and Celsius’s own crypto asset security, CEL; and engaging in market manipulation as it relates to CEL.
Unregistered Offering
According to the SEC’s complaint, from almost the inception of Celsius in 2018 to the point the company effectively halted its platform on June 12, 2022, Celsius offered to investors the Earn Interest Program, by which investors tendered their crypto assets to Celsius in exchange for interest payments. As alleged, although the Earn Interest Program constituted the offer and sale of securities under the federal securities laws, no registration was filed or in effect for the offering, and no exemption from registration was available. As a result, the Earn Interest Program lacked the protection that registration would offer.
False and Misleading Statements
According to the SEC’s complaint, throughout its operating period, Celsius and Mashinsky continually misrepresented core aspects of Celsius’s business to Earn Interest Program and CEL investors, including making false and misleading statements about trading and business strategies, risks, the company’s business model, its financial health and success, and the safety of customer assets on Celsius’s platform.
Market Manipulation
The SEC’s complaint alleges that Celsius and Mashinsky manipulated the market of CEL. Starting in at least 2020, according to the complaint, Celsius and Mashinsky engaged in a fraud to artificially increase and support the price of CEL through manipulative buy backs of CEL far in excess of its publicly disclosed purchases. As alleged, Celsius and Mashinsky — the single largest holder of CEL other than Celsius — structured the scheme to have the greatest impact on the market and induce others to buy CEL, to the benefit of Celsius and Mashinsky.
“Celsius lied to investors by presenting itself as a safe investment opportunity and a chance to gain financial freedom, but, behind the scenes, the company operated a failing business model and took significant risks with investors’ crypto assets,” said Gurbir S. Grewal, Director of the SEC’s Enforcement Division. “Thousands of retail investors have experienced significant financial hardship as a result of Celsius’s and Mashinsky’s illegal conduct, and today we are holding Celsius and Mashinsky responsible for defrauding thousands of retail investors.”
The SEC’s complaint charges Celsius and Mashinsky with violating the registration and anti-fraud provisions of the Securities Act of 1933 and the anti-fraud provisions of the Securities Exchange Act of 1934. The SEC’s complaint seeks injunctions against future securities law violations and an injunction that prohibits Mashinsky from participating, directly or indirectly, in the purchase, offer, or sale of any crypto asset securities or engaging in activities for the purposes of inducing or attempting to induce the purchase or sale of any crypto asset securities by others. The complaint also seeks to bar Mashinsky from acting as an officer or director of a public company and seeks monetary relief in the form of civil penalties, disgorgement of profits, and prejudgment interest.
Celsius is cooperating with the SEC and has consented to the relief requested in the complaint, which includes a permanent injunction against future securities law violations.
In parallel actions, the U.S. Attorney’s Office for the Southern District of New York today announced charges against Mashinsky and a non-prosecution agreement with Celsius, and the Commodity Futures Trading Commission (CFTC) today announced charges against Celsius and Mashinsky.
