Celsius founders permanently barred from crypto business as FTC fine could be fully offset

The Federal Trade Commission has secured permanent bans against three founders of bankrupt crypto lender Celsius, barring them from key crypto activities such as taking deposits, facilitating withdrawals, and enabling trading. The restrictions attach to the individuals and follow them across companies, making them far more consequential than the monetary penalties. Under the orders, former CEO Alexander Mashinsky and co-founder Shlomi Daniel Leon are prohibited from advertising, marketing, promoting, offering, distributing, or otherwise supporting products or services used to deposit, exchange, invest, or withdraw assets. Mashinsky's ban applies broadly to assets, while Leon's explicitly covers cryptocurrencies as well as banking and financial assets. The prohibitions extend to actions carried out directly or through intermediaries. A separate injunction targets co-founder Hanoch "Hank" Goldstein, focused on retail cryptocurrency businesses. He is barred from promoting or selling retail products or services related to buying, selling, depositing, withdrawing, distributing, or trading cryptocurrencies, and from assisting others in sales or marketing of such offerings. All three orders also prohibit material misrepresentations about products and services. They further bar the use of false, fictitious, or fraudulent statements to obtain or attempt to obtain customer information from financial institutions, including bank account details, login credentials, private keys, and wallet information. Mashinsky and Leon must obtain explicit, informed consent before disclosing consumers' nonpublic personal information. The measures align with allegations in the FTC's 2023 complaint, which said Celsius was promoted as safer than banks, promised instant withdrawals, and advertised yields as high as 18.63%. The FTC also alleged that Celsius claimed it had sufficient reserves on June 7, 2022, then froze withdrawals and transfers five days later. Celsius filed for bankruptcy on July 13, 2022. To support enforcement, the founders must submit reports and maintain records over the coming years to provide the FTC with monitoring information and to give courts a basis to police compliance. The FTC set a combined monetary obligation of $16.5 million. Court documents indicate Goldstein's assessed amount is $2.014 million, with the remaining amounts attributed to Mashinsky and Leon. Mashinsky's $10 million obligation may be satisfied through eligible U.S. Department of Justice forfeitures. Leon's $4.1 million obligation and Goldstein's $2.014 million obligation may be offset by payments or releases tied to the Celsius bankruptcy proceedings. As a result, the penalties may be fully covered by assets previously seized by the Department of Justice and by funds flowing through the bankruptcy process, meaning the founders could potentially pay nothing out of pocket. The FTC said any funds it ultimately receives may be used for consumer restitution or related relief; amounts not used for relief would be deposited into the U.S. Treasury. The actions do not, on their own, guarantee additional recoveries for Celsius creditors.