FTC hits Celsius founder Alex Mashinsky with $4.7B judgment – Details

The Federal Trade Commission [FTC] entered a judgment against the former Celsius CEO, Alex Mashinsky.

According to the order filed in the District Court of Southern New York, the commission entered a $4.7 billion judgment against the Celsius founder. 

This judgment is largely tied to user losses from the 2022 collapse of the Celsius lending and borrowing platform. 

However, Mashinky received a suspended judgment and will only pay $10 million in fines. The suspended sentence will be nullified and reinstated if FTC finds he failed to disclose any material assets or made any statements about his finances. 

Celsius founder Alex Mashinky gets a lifetime ban

In addition to the $10 million fine, the FTC imposed a permanent ban on Mashinky from advertising, marketing, promoting, or distributing. 

With the judgment, he will not conduct any activity related to depositing, exchanging, or investing in the future. The ruling bars Mashinky from crypto-related activities for life. 

Celsius Network filed for Chapter 11 bankruptcy in July 2022 after a liquidity crisis and froze $4.7 billion in user funds. 

The Federal Trade Commission accused Mashinky and Celsius executives of causing the firm’s collapse. According to the FTC, they are engaged in deceptive and unfair marketing practices for crypto and lending services. 

Additionally, Mashinky and his team manipulated the market, particularly the price of its native token, CEL. For this fraudulent activity, the founder is currently serving a 12-year prison sentence as per the 2024 ruling. 

The ruling shows an evolving regulatory approach in the use of civil enforcement mechanisms to address consumer harms linked to the crypto space. This is a major win for consumers in crypto as it could deter misleading representation and constrain the promotion of financial products tied to crypto.

Ionic Digital, the new face of the failed venture

After Celsius filed for bankruptcy, the network and the native token collapsed. In fact, Celsius’ market cap dropped from $1.7 billion to $677k, while the CEL token plunged 99% from $8 to $0.017 at press time. 

Despite these losses, the company found a way to survive and reinvented itself in 2024. Thus, Celsius transitioned into Ionic Digital, a Bitcoin mining company. 

According to Bitcoin Treasuries, the firm currently holds 2662 BTC worth approximately $201 million. However, the firm remains privately owned and focuses solely on mining and energy monetization. 

This shift does not imply the firm escaped responsibility, because it took the role of creditor compensation. As part of the recovery plan, the firm distributed nearly $3 billion to creditors, with the third distribution providing over $220 million.

So far, the recovery rate has reached 64%, with the firm targeting 85% rate. Importantly, the establishment of Ionic Digital was a critical part of the recovery strategy.

Final Summary

• Federal Trade Commission hits Celsius CEO Alex Mashinsky with a lifetime ban, barring him from any crypto-related activities.
• Mashinky is to pay a $10 million fine with a $4.7 billion suspended sentence.