Alex Mashinsky, the founder and former CEO of bankrupt cryptocurrency company Celsius, was arrested Thursday and charged with fraud, federal prosecutors said.
Mr. Mashinsky was also sued by the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Trade Commission. Under a settlement with the FTC, Celsius agreed to pay $4.7 billion in restitution to the company’s customers, though the payment process of that amount was suspended as the bankruptcy unfolded.
Mr. Mashinsky was arrested at his home in New York, a person close to the investigation said. The charges against him include wire fraud, commodities fraud and securities price manipulation.
Before it collapsed last year, Celsius gained fame as a crypto bank of sorts that promised customers sky-high interest rates and handled tens of billions of dollars in deposits. As his charismatic pitchman, Mr. Mashinsky appeared in YouTube videos claiming that Celsius was a safer, more egalitarian alternative to traditional banks.
At its peak, Celsius controlled about $25 billion in crypto assets. But last summer, Celsius collapsed and filed for bankruptcy amid a wider implosion in the crypto markets. In doing so, it devastated its more than 500,000 customers, many of whom lost their savings.
Authorities said the company and Mr Mashinsky repeatedly lied to investors about its business model and how it made money. It even lied about the number of customers it had and falsely told investors that their deposits were insured.