US trade regulators have reached a settlement with the bankrupt cryptocurrency platform Celsius Network to permanently ban it from handling consumers' assets after its three co-founders were charged with fraud, the Federal Trade Commission (FTC) said in a statement on Thursday
WASHINGTON (Pakistan Point News / Sputnik - 13th July, 2023) US trade regulators have reached a settlement with the bankrupt cryptocurrency platform Celsius Network to permanently ban it from handling consumers' assets after its three co-founders were charged with fraud, the Federal Trade Commission (FTC) said in a statement on Thursday.
"Celsius touted a new business model but engaged in an old-fashioned swindle," FTC Bureau of Consumer Protection Director Samuel Levine said in the statement.
Under the settlement, Celsius pledged to refrain from offering, marketing or promoting any product or service that could be used to deposit, exchange, invest or withdraw any assets, the statement said.
Celsius also agreed to freeze $4.7 billion from its accounts to enable it to settle customer assets in bankruptcy proceedings, the statement said.
"Today's action banning Celsius from handling people's money and holding its executives accountable should make clear that emerging technologies are not above the law," the statement said.
The three executives of - co-founder and Chief Executive Alexander Mashinsky and joint co-founders Shlomi Daniel Leon and Hanoch Goldstein - have not agreed to settle charges against them, the statement said.
"The FTC's case against them will proceed in federal court," the statement added.
Celsius, which filed for bankruptcy in July 2022, marketed a variety of cryptocurrency products and services to consumers, including interest-bearing accounts, personal loans secured by their cryptocurrency deposits and a cryptocurrency exchange.
According to the FTC's complaint filed in federal court, the three executives marketed the platform as a safe place for consumers to deposit cryptocurrency, claiming in online videos and other forums that its platform was safer than banks due to much lower risk.
The FTC said Celsius and its top executives deceived users by falsely promising they could withdraw their deposits at any time, that the company maintained a $750 million insurance policy for deposits and had sufficient reserves to meet customer obligations. The company also promised rewards as high as 18% on annual percentage yield on deposits of cryptocurrency assets.
Far from securing customers' cryptocurrency deposits, Celsius took title to and misappropriated deposits totaling more than $4 billion, according to the complaint. The company used the consumer deposits to fund its operations, pay rewards to other customers, borrow from other institutions, and make high-risk investments, which even the company acknowledged often lost money.
The FTC said in the statement that Mashinsky falsely claimed in an online video in 2022 that Celsius is stronger than ever and has billions of Dollars in liquidity.
In addition, Celsius falsely promised that it had "more than enough" assets to satisfy its consumer obligations only several days before freezing consumer withdrawals, the statement said.
While deceiving customers so as not to withdraw their cryptocurrencies, the three officials protected themselves by withdrawing significant sums of cryptocurrency from Celsius two months before the company filed for bankruptcy, the complaint said.
