Alex Mashinsky, the founder of Celsius Network, was arrested this week on federal securities fraud charges. The crypto lending platform also agreed to pay a $4.7 billion settlement to regulators over its past mistreatment of investors.

The Wall Street Journal reports that Alex Mashinsky, the founder of Celsius Network, was arrested on federal securities fraud charges. The now-bankrupt crypto lending platform has agreed to a staggering $4.7 billion settlement with government regulators, marking one of the largest settlements in the history of the FTC.

Mashinsky, along with co-defendant Roni Cohen-Pavon, faces decades in prison if convicted on charges that include securities, commodities, and wire fraud, as well as various securities manipulation and fraud charges. The SEC and the Commodity Futures Trading Commission (CFTC) have accused the exchange of scheming to defraud investors out of billions.

(Rafael Henrique, Jeenah Moon/Bloomberg via Getty Images)

According to the SEC, Celsius and Mashinsky defrauded investors by fabricating information about their revenue, the way they lent out users’ cryptocurrency, and their own risky trading methods. Mashinsky had promoted Celsius as a safe alternative to banks, promising returns as high as 17 percent by lending out their crypto.

However, the company, which once held more than $13 billion in investors’ crypto balances, halted withdrawals in June 2022. This move created a crisis for the thousands of people who had entrusted their tokens to the company. Many of Celsius customers’ assets are still tied up in bankruptcy.

Federal prosecutors allege that Mashinsky misrepresented a number of things, including the security of Celsius’s yield-generating operations, the company’s profitability, the long-term viability of Celsius’ high reward rates, and the risks involved in deposing crypto assets with Celsius.

The SEC proceedings allege that Mashinsky misled investors and fraudulently manipulated the price of Celsius’ exchange token, CEL. The SEC claims Mashinsky and his business “misrepresented” Celsius’s “central business model and the risks to investors” by claiming the company did not engage in risky trading and paid the majority of its revenue over to investors.

The $4.7 billion settlement will not be paid until the company is able to return what remains of customer assets in bankruptcy proceedings. Earlier this year, Mashinsky was accused of orchestrating a $20 billion fraud against investors.

Read more at the Wall Street Journal here.

Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan