The United States Federal Trade Commission (FTC) has imposed a hefty fine of $4.7 billion on the now-bankrupt crypto lender, Celsius Network. The FTC alleges that Celsius squandered billions in user deposits after misleading customers into depositing funds. However, the fine will be suspended to allow Celsius to return its remaining assets to consumers during bankruptcy proceedings.

Permanent Ban and Legal Proceedings

As per the FTC’s announcement on July 13, Celsius and its affiliated companies are now permanently prohibited from offering, marketing, or promoting any product or service that could facilitate the deposit, exchange, investment, or withdrawal of any assets. The co-founders of the New Jersey-based firm, Alex Mashinsky, Shlomi Leon, and Hanoch Goldstein, who have been accused of marketing the platform as a secure place for consumers to deposit their cryptocurrency, will face federal court as they have not agreed to an FTC settlement.

Accusations of Misappropriation and False Statements

The FTC’s complaint alleges that the co-founders misappropriated over $4 billion in consumer assets. The regulatory body also accuses Celsius of making $1.2 billion in unsecured loans, falsely claiming to have a $750-million user insurance policy, and not having a system to track its assets and liabilities until late 2021. The FTC further alleges that even during the 2022 cryptocurrency bear market, the executives lied about the company’s financial health.

Executives’ Self-Protection and Consumer Losses

The FTC claims that while the executives were misleading their customers to prevent them from withdrawing their cryptocurrency deposits, Leon, Goldstein, and Mashinsky protected themselves by withdrawing substantial amounts of cryptocurrency from Celsius two months before the company filed for bankruptcy. This action resulted in consumers losing access to their life savings, college funds, and retirement savings.

Additional Legal Troubles

On the same day as the FTC’s announcement, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission also filed lawsuits against Celsius. Furthermore, Mashinsky was indicted on seven fraud-related charges by the U.S. Department of Justice and was subsequently taken into custody. Celsius had previously filed for bankruptcy in July of the previous year.