CFTC spokesperson says Celsius and former CEO Alex Mashinsky violated US law

Three days after Celsius detonated on July 13, 2022, the CFTC, followed shortly by the SEC, launched separate investigations into the crypto platform’s business practices.

The company was also investigated – and in some cases prosecuted – separately by local authorities in Vermont, New York and elsewhere.

I’m Suing the Former CEO of a Cryptocurrency Platform @celsiusnetwork For defrauding investors out of billions of dollars.

Alex Mashinsky lied to the public about the risks of investing in Celsius, concealed its deteriorating financial condition, and failed to register in New York.

— NY AG James (@NewYorkStateAG) 5 January 2023

However, the charges brought by the CFTC against Celsius will likely be federal.

Confidential CFTC source says Celsius misled investors

The CFTC investigation is now over, and individuals within the organization have said that both Alex Mashinsky and his platform misled investors and ignored existing regulations, According to Bloomberg.

These allegations match those made by NYAG Letitia James, who accused Mashinsky of knowingly making false claims about the financial condition of her firm in order to entice investors.

“As the former CEO of Celsius, Alex Mashinsky promised investors a path toward financial freedom, but instead led them down a path of financial ruin. The law is clear that it is illegal to make false and baseless promises and mislead investors. (…) My office will remain vigilant and ensure that bad actors trying to profit from New York investors are held accountable.

In turn, Mashinsky responded that the New York Attorney General “fundamentally misunderstood” both Celsius’ business model and his role as CEO.

However, the organization has so far refused to comment officially on the matter. Sources within the organization also declined to specify what rules Celsius and Mashinsky specifically broke, other than failing to register with the relevant authorities.

Trial possible by end of July

Now that the investigation is over, the CFTC will reportedly host an internal vote on what to do with the information they exposed.

If a majority of CFTC commissioners agree with the interpretation of the research teams’ findings, a federal lawsuit could be filed against Celsius and, very likely, against Mashinsky himself. Assuming no one decides to play devil’s advocate within the commission, the case could be over before the end of July, according to the confidential source.

Should the case be brought before federal court, it would be the latest in a series of more than 85 cases filed by the CFTC regarding digital assets. CFTC Director Rostin Benham said that so far, the agency has caused over $4 billion in fines and restitution from fraudulent crypto markets.