Founders of Celsius Network Ordered to Pay $16.5 Million to Resolve FTC Charges
The FTC ordered Celsius Network’s founders to pay $16.5 million for deceiving users about deposit safety and withdrawals, with additional marketing bans imposed.
The Federal Trade Commission announced that Alexander Mashinsky, Shlomi Daniel Leon, and Hanoch Goldstein will collectively pay $16.5 million to resolve charges that Celsius Network falsely assured customers their deposits were secure and always accessible. The FTC alleged Celsius misrepresented its financial stability, claiming deposits were protected by a $750 million insurance policy and that customers could withdraw funds at any time, despite knowing these statements were false. The agency also accused the company of hiding its true financial condition, including unsecured loans, even as executives continued to assure users of safety days before Celsius filed for bankruptcy in July 2023.
Under the settlement, Mashinsky will pay $10 million, Leon $4.1 million, and Goldstein $2.4 million, with additional restrictions on their ability to market or sell cryptocurrency-related services. Mashinsky and Leon are banned from disclosing consumers’ nonpublic personal information without explicit consent, addressing concerns about data misuse during the company’s operations. The orders, approved by the FTC in bipartisan votes, carry the force of law once signed by a federal judge in the Southern District of New York.
The FTC’s complaint, filed in July 2023, detailed how Celsius and its executives promoted the platform as safer than traditional banks while failing to disclose its precarious financial state. The agency highlighted false claims about a 18% annual percentage yield in the Earn program and the company’s supposed risk-free profit model through secured loans to other exchanges. These deceptive practices allegedly misled thousands of consumers who deposited billions into the platform, only to lose access to their funds when Celsius collapsed.
The settlement concludes a years-long investigation into Celsius Network’s operations, which attracted users with high-yield promises before freezing withdrawals in June 2022 amid liquidity crises. The FTC’s action underscores its commitment to holding executives accountable for misleading financial practices, particularly in emerging sectors like cryptocurrency where consumer protections remain underdeveloped. The orders prohibit the founders from future misrepresentations and restrict their involvement in cryptocurrency-related businesses.