In a significant blow to Celsius Network, the United States Federal Trade Commission (FTC) has imposed a staggering $4.7 billion fine on the New Jersey-based crypto lender. However, the FTC has indicated that the judgment may be temporarily suspended, allowing the bankrupt company to fulfill its obligations and repay its customers.
The FTC’s announcement on July 13 also revealed a permanent ban on Celsius and its affiliated companies, prohibiting them from offering, marketing, or promoting any investment-related products or services.
The FTC leveled several allegations against Celsius, claiming that the company, co-founded by Alex Mashinsky, Shlomi Leon, and Hanoch Goldstein, deceived customers into depositing their crypto assets on the platform. According to the regulator, Celsius marketed a range of crypto products and services with false promises to customers.
The FTC further alleges that the co-founders misappropriated customer assets worth over $4 billion. However, the co-founders have yet to agree to the fine, indicating that the case will likely proceed to federal court.
In addition, the FTC accused Celsius of consistently misleading its customers about its financial health. While Celsius continued taking customer funds, it allegedly made $1.2 billion in unsecured loans and falsely claimed a $750 million user insurance policy. The FTC’s statement reveals that the company’s executives enriched themselves by withdrawing significant amounts of cryptocurrency from Celsius just two months before filing for bankruptcy while simultaneously deceiving customers and preventing them from withdrawing their deposits.
The troubles for Celsius do not end there, as the company currently faces lawsuits from the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Furthermore, Alex Mashinsky, one of the co-founders, is facing a seven-count charge by the US Department of Justice and is currently in detention. Last July, Celsius had already filed for Chapter 11 bankruptcy.
The severity of the allegations and the ongoing legal battles cast a shadow over the future of Celsius Network. The fines, bans, and pending lawsuits raise questions about the credibility and trustworthiness of the company, as well as the broader implications for the crypto lending industry.
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