UPDATE
Jul 13, 2023 6:05 PM CDT
Alexander Mashinsky, the founder of Celsius Network, a cryptocurrency lending platform, was recently arrested on federal charges. Mashinsky is accused of misleading investors about the company’s financial stability, according to ABC News. The Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) have also filed lawsuits, alleging that both Mashinsky and the company made false promises of a secure investment with high returns. The charges against Mashinsky include securities, commodities, and wire fraud, as well as illegal manipulation of the price of Celsius’ crypto token. Mashinsky pleaded not guilty and was released on a $40 million bail.
Jul 14, 2022 8:26 AM CDT
Celsius Networks, one of the largest cryptocurrency lenders, has become the latest casualty of this year’s significant decline in cryptocurrency prices. The company has filed for Chapter 11 bankruptcy protection, leaving its customers uncertain about the fate of their funds, as reported by CNBC. Celsius Networks had offered customers interest rates of up to 18% on their cryptocurrency, which the company borrowed to lend to institutional investors, according to Bloomberg. The company had to freeze withdrawals to prevent selective payments to some customers, leaving others behind.
In its bankruptcy filing, Celsius Networks reported estimated assets and liabilities between $1 billion and $10 billion, with over 100,000 creditors, as per Reuters. The company claims to have $167 million in cash to finance essential operations, including staff salaries, during the bankruptcy process. However, it is not seeking approval to resume withdrawals while undergoing restructuring. The collapse of Celsius Networks and other similar firms highlights the lack of legal protection for cryptocurrency investors. Unlike regulated banks and brokerages, crypto investors do not have safety nets for such failures, suggests Wall Street Journal.
Six state regulators, including Vermont, are currently investigating Celsius Networks. Vermont accuses the company of engaging in risky and illiquid investments, trading, and lending activities involving customer assets. CNBC interviews Georgetown law professor Adam Levitin who explains that customers may only receive a fraction of their funds, and even that could take several years. Levitin predicts that more significant bankruptcies are likely to occur within the industry. “We are yet to see the extent of the fallout,” he says. (Read more cryptocurrency stories.)
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