An investigation by the commodities regulator has reportedly accused crypto lender Celsius Network and its former chief of breaking the rules. The CFTC probe puts the company and former CEO Alex Mashinsky in the hot seat.
The agency could initiate a federal case if most CFTC commissioners agree with the decision.
CFTC Alleges Celsius Broke Rules
CFTC Investigators discovered that Celsius deceived investors before it filed for bankruptcy, according to Bloomberg sources. It is accused of failing to register with the regulator, with Mashinsky himself on the radar for breaking regulations.
The representatives of the agency and the firm have not responded to the paper.
Apart from the Commodity Futures Trading Commission investigation, more agencies are looking into Celsius.
According to the filings cited by the report, the SEC and federal prosecutors in Manhattan are conducting their own inquiries. More about the present status of these investigations could be unveiled in the coming days.
Celsius’ Rise and Collapse
During the pandemic, Celsius grew in popularity thanks to its loans and high-interest rates on virtual token deposits. However, the rise came to a halt with the Terra Luna disaster.
Mashinsky often touted the safety of Celsius’s offerings before freezing withdrawals in June 2022.
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Meanwhile, Letitia James is also suing Mashinsky. James, the attorney general of New York, has alleged that it misled investors and misrepresented Celsius’ financial situation.
The legal disputes have continued despite Mashinsky’s solicitors’ attempts to dismiss the allegations. Of them, more than 26,000 New Yorkers claim to have been defrauded.
Enforcement Actions in a Changing Landscape
A case against Celsius could become one of the many actions taken by the CFTC. Last year, it reportedly brought over 85 cases related to fraud and manipulation in the digital-asset market.
The Justice Department recently announced that William Ichioka pleaded guilty to multiple fraud charges related to running a crypto Ponzi scheme. Furthermore, the CFTC sued Justby International Auctions, alleging that the business ran a romance scam that duped clients of over $1.3 million.
While this is happening, Celsius creditors recently amended their complaint against the insolvent company, alleging officials of engaging in wash trading. To artificially stimulate market activity, wash trading entails purchasing and selling the same financial items simultaneously.
The creditors accuse the company of using algorithmic trading firm Wintermute for the trades. According to the class action lawsuit, Celsius manipulated the price of its CEL token and employed dishonest methods to maintain its value.
Wintermute Trading Ltd. is now named as a defendant in the lawsuit. The suit will examine Wintermute’s exact role involvement in Celsius’s operations.
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