The U.S. Federal Trade Commission (FTC) announced the settlement of claims against Celsius Network. The agreement calls for the crypto-lending platform to pay $4.7 billion.
According to the statement, Celsius and its subsidiaries are ‘permanently prohibited from offering, selling, or promoting any products or services that could be used to contribute, exchange, invest in, or withdraw any assets’.
“Celsius marketed a new business model, but engaged in old-fashioned fraud,” the statement said.
The Commission accused the company of providing unsecured loans totaling $1.2 billion and making false statements about the ability to withdraw deposits at any time, as well as sufficient reserves to meet obligations.
“Celsius not only failed to safeguard customer funds in cryptocurrency, but also unlawfully misappropriated these deposits amounting to more than $4 billion. The company used consumer deposits to fund its operations, pay rewards to other customers, borrow from other institutions and engage in high-risk investments, which, as the company itself acknowledged, often led to losses,” the statement said.
The platform’s founders Alex Mashinsky, Nuke Goldstein and S. Daniel Leon did not settle, the FTC noted. The Commission accused them of deceiving customers and making false statements.
“The company … sold to consumers various crypto products and services […]. According to the complaint filed by the FTC in federal court, Mashinsky, Leon and Goldstein promoted the platform as a safe place where consumers could deposit their cryptocurrency, stating in online videos and on other forums that Celsius is safer than banks”, the FTC emphasised.
The agency added that the court order to pay $4.7 billion would be stayed to allow Celsius to return the remaining funds to customers as part of the bankruptcy proceedings.
Representatives of Celsius said they were glad to have reached agreements with the DOJ, SEC, CFTC and the FTC. The company also stressed its commitment to “ongoing cooperation with regulators and authorities.”
“We expect these settlements will not affect our plan or our ability to return funds to customers,” the statement said.
Crypto community members reacted negatively to the platform’s response. One Twitter user called it strange:
“If this company had even a drop of human decency, you would not be ‘satisfied’. You could say: ‘We regret how badly we treated our customers and users, and that our top executives face decades in prison for what we did to you'”.
Another participant agreed with this view, expressing discontent with the use of corporate and legal phrasing. Another community member criticised the platform and said that users “are glad to see Alex Mashinsky, accused of multiple crimes”.
In June 2022, Celsius halted withdrawals, trading and transfers between accounts due to extreme market conditions.
Following the filing for bankruptcy, Celsius reported a ‘hole’ in its balance sheet of $1.2 billion. In August it emerged that the company’s liabilities exceeded its assets by $2.85 billion.
In September, the platform’s chief Alex Mashinsky stepped down as CEO. In early 2023, the New York attorney-general’s office charged him with deceiving investors by billions of dollars.
In July, the U.S. Department of Justice filed seven criminal charges against the former Celsius chief. They include securities fraud, manipulation of the CEL token price and misleading investors.