Alex Mashinsky, former CEO of defunct cryptocurrency lender Celsius, taken into custody

The Justice Department is accusing Mashinsky of engaging in a sweeping scheme to defraud customers by misleading them about the company’s success and the nature of the investments he made with their funds. They also allege he manipulated the price of the company’s own crypto token while secretly selling it at inflated prices.

“The allegations may be complicated, but the message is simple: If you lie, cheat or steal, or if you rip off ordinary investors to line your own pockets, we will hold you accountable,” Damian Williams, the U.S. Attorney for the Southern District of New York, said Thursday at a news conference. “Whether it’s old school fraud or some new school crypto scheme, it doesn’t matter one bit. It’s all fraud to us.”

Mashinsky founded Celsius in 2018 and quickly built the company into a juggernaut by billing it as a new and more trustworthy form of bank. He promised users they could safely deposit their crypto assets and earn robust returns through the company’s “Earn” program, which used their funds to generate investment income. At its peak in the fall of 2021, Celsius held $25 billion in assets, according to the Justice Department.

But even as Celsius attracted a surge of new customers during the pandemic-driven crypto boom, it was lying about its success, the riskiness of its investment strategies, its business model and the safety of customer deposits, regulators allege. Mashinsky and his team were “often completely fabricating their financials,” SEC Enforcement Director Gurbir Grewal said Thursday.

Meanwhile, Mashinsky and Roni Cohen-Pavon, the company’s former chief revenue officer, engaged in a scheme to manipulate the price of Celsius’s own crypto token to enrich themselves, prosecutors allege. Mashinsky pocketed $42 million in profit from that scheme, and Cohen-Pavon made $3.6 million, according to the indictment.

Cohen-Pavon also faces criminal charges, but the Israeli resident remains abroad and has not been taken into custody, the Justice Department said.

The company collapsed last summer amid a wider crypto industry meltdown. In June 2022, as a rising tide of customers ignored assurances from Mashinsky that their deposits were secure and instead raced to withdraw from the platform, Celsius froze $4.7 billion in deposits from hundreds of thousands of users.

“Ultimately the defendants’ elaborate crypto fraud collapsed of its own weight when their lies and other fraudulent conduct could no longer prop up the Celsius platform and

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