Celsius Network faces significant consequences as the United States Federal Trade Commission (FTC) reaches a settlement with the bankrupt cryptocurrency lender.
The FTC has imposed a $4.7-billion fine on the company and permanently banned it from handling consumer assets. These measures aim to protect consumers and hold accountable those responsible for the misappropriation of billions of dollars in user deposits.
FTC’s Reasoning and Celsius Wrongdoings
The FTC’s investigation into Celsius has uncovered a series of deceptive practices. The company marketed various products and services to consumers, such as interest-bearing accounts, personal loans secured by cryptocurrency deposits, and a crypto exchange.
However, co-founders Alex Mashinsky, Shlomi Leon, and Hanoch Goldstein misrepresented the platform as a haven for cryptocurrency deposits, falsely claiming its superiority over traditional banks.
The FTC’s complaint reveals that Celsius engaged in deceptive practices by falsely assuring users that their deposits would always be safe and accessible. The company claimed a $750-million deposit insurance policy and denied making unsecured loans. These misleading statements played a crucial role in influencing many consumers’ decisions to deposit their cryptocurrency with Celsius.
Contrary to these promises, Celsius Network misappropriated over $4 billion in customer deposits, diverting the funds for operational expenses, rewarding select customers, and making high-risk investments. Additionally, Celsius lacked a proper system to track its assets and liabilities until mid-2021, compromising user deposit security.
Further investigation revealed how Celsius Network’s top executives took advantage of their positions to safeguard themselves at customers’ expense. Two months before the company’s bankruptcy filing, Leon, Goldstein, and Mashinsky withdrew substantial amounts of cryptocurrency, leaving consumers without access to their funds.
Consequences
The FTC has imposed a $4.7-billion fine on Celsius Network and permanently banned the company and its affiliates from engaging in any activities related to depositing, exchanging, investing, or withdrawing assets. These measures aim to protect consumers and prevent the recurrence of such deceptive practices.
In addition, the FTC has initiated legal action against the co-founders. Mashinsky was arrested and faces seven fraud-related charges filed by the U.S. Department of Justice. Although Celsius Network has filed for bankruptcy, the FTC’s case against the co-founders will proceed in federal court to ensure they are held accountable for their roles in perpetuating the fraudulent activities.
Conclusion
In conclusion, Celsius Network’s deceptive practices have resulted in significant penalties, including a $4.7-billion fine and a permanent ban on asset handling.
The FTC’s intervention aims to rectify consumer harm and establish accountability within the cryptocurrency space. This case serves as a crucial reminder that consumer protection must remain a priority as digital currencies continue to gain prominence in the financial landscape.
