Three former executives of bankrupt crypto firm Celsius - including its former head Alex Mashinsky - have been charged by the Federal Trade Commission (FTC) for tricking customers into transferring their crypto assets onto their platform by promising deposits would be safe and always available.
The FTC also declared today that it would be banning Celsius from handling people’s money, effectively stopping any type of relaunch. The FTC states that Celsius agreed to a judgment of $4.7 billion which is suspended so the company can return assets to customers during the bankruptcy proceedings.
It also said that the three executives, ex-CEO and co-found Alexander Mashinsky, co-founder Shlomi Daniel Leon, and co-founder Hanoch ‘Nuke’ Goldstein didn’t agree to a settlement so the FTC case will proceed in court.
The case against the company rests on the fact that Celsius pitched itself to customers as a safe place to keep their crypto, even claiming it’s less risky than banks. The FTC says that Celsius misled customers in the following ways:
- Top executives deceived users by falsely promising them that they could withdraw their deposits at any time.
- The company maintained a $750 million insurance policy for deposits.
- The company has sufficient reserves to meet customer obligations.
- Those in its Earn programme could earn rewards on deposits of cryptocurrency assets as high as 18 percent annual percentage yield (APY).
- The company also claimed it didn’t make any unsecured loans.
According to the FTC, many customers reported that these promises were factors in their decision to deposit cryptocurrency with Celsius. The FTC claims that the company then used these deposits to fund operations, pay rewards to other customers, borrow from other institutions, and make high-risk investments that often lost money.
The FTC’s complaint against Celsius has been filed with the United States (U.S.) District Court for the Southern District of New York. It’s unclear how long this issue will take to resolve between the company and the FTC.