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Alex Mashinsky

Alex Mashinsky is the Founder and ex-CEO of , a bankrupt  and financial loans platform that was made to connect holders of crypto-assets with borrowers. He was arrest in June 2022, due to the series of lawsuits against Celsius Network and his fraudulent activity.[1][2]

Education

From 1987 to 1989, Alex studied at Tel Aviv University and received B.S. in Economics. Prior to that, from 1980 to 1982, he was a student of Open University of Israel and graduated with B.E. in Electrical Engineering.[8]

Career

In January 1995, he founded Arbinet, the telecom industry's largest exchange. Arbinet facilitated over 20 billion transactions annually, connecting more than 2,500 phone companies. The company merged with Primus in 2011, generating $1.5 billion in annual revenues. In 2012, the combined entity sold its assets, distributing over $800 million to shareholders. [29]

In August 1997, Mashinsky founded Comgates, a leading soft switch vendor that ultimately merged with Telco Systems. Following this, in January 2001, he founded Elematics, developing control panel software for optical telecom infrastructure. [29]

In April 2004, Mashinsky established Governing Dynamics, an Israeli-American venture fund. The fund focused on investing in promising growth companies in sectors such as Biotech, AI, Energy, and Cyber-Security. Governing Dynamics helped Israeli startups scale-up in the United States, fostering innovation and collaboration. [29]

Mashinsky then founded GroundLink in May 2005. GroundLink introduced on-demand ride-sharing through its mobile app, operating in over 5,000 cities worldwide. [29]

Mashinsky then co-founded in February 2017. Celsius Network provided a -based platform offering compounding yield services and low-cost loans to over a million customers globally. The platform aimed to prioritize customer and community interests, providing curated services beyond traditional institutions before it went bankrupt in June 2022. Mashinsky served as the Founder and CEO of Celsius Network until September 2022. [29]

He also served as the CEO and Board Member of Inseego Corp. (formerly Novatel Wireless, Inc) from April 2014 to November 2015, delivering specialized wireless solutions worldwide. Additionally, he served as a Board Member of Tellabs from February 2013 to December 2013, contributing his expertise to the telecommunications industry. [29]

Mashinsky alsowas the Chairman of USA STRONG, a position he held since September 2022. USA STRONG aims to revive the Made in America brand, connecting local manufacturers and customers and supporting local communities. [29]

Legal Disputes

Lawsuit Allegations Against Celsius Network

In November 2022, faced a lawsuit filed by former investment manager Jason Stone, accusing the crypto lending platform of fraudulent activities and operating as a Ponzi scheme. Stone alleged that Celsius artificially inflated the price of its native digital coin, failed to implement proper risk management strategies, and used customer deposits to rig the value of its token. The lawsuit also claimed that Mashinsky enriched himself at the expense of depositors. [21][22]

Stone further alleged that Celsius failed to hedge against trading risks and had significant liabilities denominated in the cryptocurrency Ether without sufficient holdings to cover them. As a result, when customers attempted to withdraw their deposits, Celsius was forced to buy more ether at high prices, incurring heavy losses. The lawsuit characterized Celsius as a Ponzi scheme, accusing the company of resorting to offering double-digit interest rates to attract new depositors and repay earlier investors. [21][22]

Celsius faced additional scrutiny due to a liquidity crisis and the temporary suspension of withdrawals for its users. Stone's departure from Celsius in March 2021 was allegedly prompted by the company's unexplained balance sheet hole of $100 million to $200 million. The lawsuit claimed that Celsius continued to control an wallet, which the CEO allegedly used for personal benefit, including transferring valuable non-fungible tokens to his wife's wallet. [21][22]

Lawsuits Against Celsius and Mashinsky

On July 13, 2023, a series of lawsuits were filed by various federal agencies, including the U.S. Department of Justice (DOJ), the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and the Commodity Futures Trading Commission (CFTC). These legal actions targeted both Celsius Network as a company and its former CEO, Alex Mashinsky. [23]

U.S. Department of Justice (DOJ) Lawsuit

The DOJ brought criminal charges against Mashinsky, including allegations of defrauding customers and pocketing $42 million. The indictment accused Mashinsky and other Celsius executives of orchestrating a scheme to inflate the value of Celsius' native token, CEL, in order to profit from its sale. Mashinsky's colleague, former chief revenue officer Roni Cohen-Pavon, was also charged in connection with these criminal activities. [23][24]

Securities and Exchange Commission (SEC) Lawsuit

The SEC filed a lawsuit against Celsius Network and Mashinsky, alleging that the company repeatedly lied to customers about the safety of its platform. The SEC claimed that Celsius made false statements regarding regulatory approvals, misrepresented its user base, and engaged in market manipulation. The complaint further accused Celsius of offering and selling unregistered securities through its lending program. [23][25]

Federal Trade Commission (FTC) Lawsuit

The FTC accused Celsius of deceiving consumers by misleading them into depositing their assets and subsequently mismanaging their investments. The FTC alleged that Celsius lied to investors, failed to maintain sufficient liquid assets for withdrawals, and falsely marketed itself as a safe alternative to traditional banking. The lawsuit named not only Celsius Network but also its co-founders Shlomi Daniel Leon and Hanoch "Nuke" Goldstein. [23][26]

Commodity Futures Trading Commission (CFTC) Lawsuit

The CFTC charged Mashinsky and Celsius Network with fraud and material misrepresentations related to the operation of Celsius' digital asset-based finance platform. The CFTC alleged that Celsius made false statements to customers and deceived them about the company's leverage. Mashinsky was specifically cautioned by Celsius senior management to cease making misleading statements. [23][27]

Consequences and Settlements

As a result of these lawsuits, Mashinsky was arrested and faced criminal charges, while Celsius Network and its affiliates were subject to fines, penalties, and bans. Mashinsky pleaded not guilty to charges of fraud and manipulation of the CEL token. Following his arrest, Mashinsky's bail was set at $40 million by a U.S. District Judge. As part of the bail agreement, he is restricted from traveling and prohibited from opening new bank or accounts. [28]

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Alex Mashinsky

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Edited On

September 21, 2023

Reason for edit:

minor edit to intro

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