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Another multi-billion-dollar crypto fraudster is headed to prison, Coinbase vows to take revenge on anti-crypto US regulators, and Trump names a crypto acolyte as the Securities and Exchange Commission (SEC) chair.
The founder and former CEO of bankrupt crypto lending platform Celsius has pleaded guilty to orchestrating a multi-billion-dollar crypto fraud, and now faces up to 30 years in a US prison.
Alexander Mashinsky pleaded guilty to one count of commodities fraud and one count of securities fraud at a New York court on Tuesday (December 3).
插莽泭 by the Department of Justice (DOJ), the two counts relate to separate fraudulent schemes that Mashinsky orchestrated as CEO of Celsius.
In the first scheme, Mashinsky misled Celsiuss customers about the purported success and profitability of the company, and the nature of its use of customer funds.
In the second scheme, the former CEO illegally manipulated the price of CEL, Celsiuss proprietary token, to artificially and illegally inflate its value.
The DOJ found that Mashinksy made around $48m in from his sales of CEL, while publicly telling Celsius community members that he was not selling.
Mashinsky, who is set to be sentenced in April 2025, will forfeit the entire $48m as part of his plea agreement.
Cryptos largest lending platform ends in tears
Founded in 2017, Celsius was a centralised platform that allowed customers to earn returns on their crypto-assets in the form of weekly rewards payments.
This feature, known as Celsius Earn, paid returns of up to 18 percent annually on deposited crypto-assets.
In addition, the Celsius Borrow feature allowed customers to take out loans using their deposited crypto-assets as collateral.
In his public statements, Mashinsky marketed Celsius as the safest place for your crypto and safer than a bank.
He also said customers could withdraw their assets at any time because Celsius had billions of dollars in liquidity.
At its peak in 2021, Celsius had approximately $25bn in customer assets, making it the largest crypto lending platform in the world. But by the time of its collapse and bankruptcy filing in July 2022, its total customer assets had fallen to approximately $4.7bn.
Damian Williams, prosecuting US attorney, said that Mashinsky had lured millions of retail investors to Celsius with false promises that its yield-generating crypto offerings were low-risk.
Using catchy slogans like Unbank Yourself, Mashinsky promised that Celsius would keep customers crypto as safe as money in a bank, but that, unlike a bank, Celsius returned most of the profits from its business back to users, said Williams.
In reality, and ascovered by 蹤獲鱉鱉 in 2023, Celsius was insolvent since its inception, and did not generate sufficient revenue to continue paying rewards to existing customers.
Shoba Pillay, a court-appointed bankruptcy examiner, said the Ponzi-like nature of Celsius's business model meant that Mashinsky and other insiders had to take riskier bets in order to generate rewards and prop up the price of CEL.
This scheme came crashing to an end in May 2022, when crypto prices collapsed abruptly following a run on the TerraUSD stablecoin.
Celsius paused all customer withdrawals in June 2022, but not before Mashinsky withdrew $8m of his own assets from the platform.
Coinbase CEO plots revenge on anti-crypto regulators
Coinbase CEO Brian Armstrong has that he plans to ostracise regulatory officials who worked for the SEC under President Biden.
Writing on X this week, Armstrong said that Coinbase has informed all the law firms it works with that if they hire anyone who worked for the SEC under Biden, Coinbase will no longer be a client of theirs.
It's an ethics violation in my book to try and unlawfully kill an industry while refusing to publish clear rules, he said.
If you were senior there, you cannot say you were just following orders. They had the option to leave the SEC and many good people did.
They can go work in other areas, but we as an industry should not be putting money in their pocket after the abuse.
As an example, Armstrong noted that the Milbank law firm has messed up in its hiring of Gurbir Grewal, who served as head of enforcement at the SEC under Biden.
The CEO said that Coinbase has now cut ties with Milbank, and will not work with the firm while Grewal is on its payroll.
Trump names SEC chair to replace Gary Gensler
Donald Trump has Paul Atkins as the successor to outgoing SEC chair Gary Gensler.
Paul is a proven leader for common sense regulations, Trump said in a statement, announcing the appointment.
He believes in the promise of robust, innovative capital markets that are responsive to the needs of investors, and that provide capital to make our economy the best in the world.
He also recognises that digital assets and other innovations are crucial to making America greater than ever before.
Atkins previously served as SEC chair from 2002 to 2008 under President George W. Bush.
He is the founder and CEO of Patomak Global Partners, a risk management consultancy, and a co-chair of the Token Alliance since 2017.
Under the umbrella of the Digital Chamber of Commerce, the Token Alliance promotes best practices and frameworks for the responsible growth of tokenised networks and applications.
It also engages with state and local governments on the regulation and implementation of blockchain technology.
