Alexander Mashinsky, the former CEO of cryptocurrency platform Celsius Network Inc., and his business partners, Shlomi Daniel Leon and Hanoch “Nuke” Goldstein, will pay a total of $16.5 million to resolve Federal Trade Commission charges that they deceived users by falsely promising that deposits made to their cryptocurrency platform would be safe and always available, according to a July 20 announcement.
Mashinsky and Leon have also agreed to a ban on marketing or selling products or services that can be used to deposit, exchange, invest, or withdraw assets. Goldstein has agreed to a similar ban on marketing or selling retail products or services related to buying, selling, depositing, withdrawing, distributing, or trading cryptocurrency.
In its July 2023 complaint, the Federal Trade Commission alleged that Celsius and its co-founders promised consumers that Celsius was “safer” than banks or other traditional financial institutions. The complaint said they misrepresented their deposits as safe because Celsius earned profits at “no risk” by making secured loans to other exchanges.
The Federal Trade Commission said the company and its top executives deceived users by falsely promising them that they could withdraw their deposits at any time; claiming the company maintained a $750 million insurance policy for deposits; stating it had sufficient reserves for customer obligations; offering rewards as high as 18% annual percentage yield on deposits in its Earn program; and repeatedly asserting it did not make unsecured loans. The agency alleged these promises were false and said executives continued making such claims days before filing for bankruptcy.
Settlement orders require Mashinsky to pay $10 million, Leon $4.1 million, and Goldstein $2.4 million. The orders prohibit the co-founders from marketing certain asset-related products due to deceptive conduct causing consumer injury; making misrepresentations about product benefits or material facts; violating the Gramm-Leach-Bliley Act by obtaining customer financial information through false representations; and disclosing nonpublic personal information without express informed consent from consumers.
The stipulated final order with Mashinsky was approved unanimously prior to Commissioner Melissa Holyoak’s departure. Orders with Leon and Goldstein were both approved 2–0 by the commission before being filed in U.S. District Court for the Southern District of New York.