Celsius and Alex Mashinsky face slew of criminal, regulatory allegations


Alex Mashinsky and the company he founded and led face a battery of fraud-related accusations after criminal and civil charges were brought against the former Celsius CEO, and the company was named as co-defendant in civil enforcement cases brought by U.S. regulators. 

The former CEO of the bankrupt crypto lender Celsius was charged by federal prosecutors in an indictment made public on Thursday, with allegations of multiple schemes to defraud his customers. 

The indictment and filings by federal regulators allege that Mashinsky and the company pumped the price of Celsius’s native token using customer assets and repeatedly misled their customers. The Securities and Exchange Commission, Federal Trade Commission and Commodity Futures Trading Commission also took their own civil enforcement actions against Mashinsky and the company.

In sum and substance, Mashinsky portrayed Celsius as a modem-day bank, where customers could safely deposit crypto assets and earn interest,” prosecutors said in their indictment of the embattled former CEO and Roni Cohen-Pavon, the company’s chief revenue officer. 

“In truth, however, Mashinsky operated Celsius as a risky investment fund, taking in customer money under false and misleading pretenses and turning customers into unwitting investors in a business far riskier and far less profitable than what Mashinsky had represented,” they continued.

Celsius settles with the FTC

Celsius itself settled with the FTC for $4.7 billion, though because of the company’s ongoing bankruptcy, the FTC agreed to suspend the payment to allow Celsius to maximize return of its remaining assets to customers. Mashinsky and co-founders Shlomi Daniel Leon and Hanoch “Nuke” Goldstein” did not, meaning the agency will press forward with a civil case against them in court. 

“While lying to their customers to keep them from withdrawing their cryptocurrency deposits, Leon, Goldstein, and Mashinsky protected themselves by withdrawing significant sums of cryptocurrency from Celsius two months before the company filed for bankruptcy,” the FTC said in a statement. “Consumers subsequently lost access to their life savings, college funds, and money saved for retirement.”

The SEC and CFTC enforcement actions remain open despite the company’s settlement with the FTC. 

Prosecutors and regulators said Mashinsky “made so many false and misleading statements” in live internet broadcasts that employees began reviewing the videos after they aired, at some points editing out “misrepresentations” after repeatedly warning Mashinsky that what he said wasn’t true. 

Mashinsky and the company are also accused of lying to customers and conducting business operations that contributed to the company’s failure, including the issuance of over $1 billion in unsecured business loans despite public statements by Mashinsky to the contrary. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Here’s a list of Bahamas properties SBF bought with customer funds


Former FTX CEO Sam Bankman-Fried spent millions of commingled customer funds on multiple million dollar luxury properties in the Bahamas for employees and their friends and families, according to the latest investigative report released by debtors on Monday. 

Over $243 million was spent properties including the now infamous six-bedroom, 11,500 square foot penthouse at the Albany resort community in Nassau where the FTX founder and his lieutenants Caroline Ellison, Nishad Singh and Gary Wang, among others, all lived.

The report contained a detailed list of other properties executives are alleged to have purchased with funds from accounts that commingled customer and company assets.

Screen shot of Bahamas properties bought by Sam Bankman-Fried
Bahamas properties bought by FTX, according to the debtors’ report released Monday.

The Albany Honeycomb units

The FTX Group spent upwards of $18 million on properties in the Bahamas called the “Albany Honeycomb” units, according to the report. 

A similar unit in the complex, 6C, has almost 6,000 square feet and five bedrooms, according to a listing from Christie’s International Real Estate.

“The tastefully furnished living area benefits from a full wet bar with a wine cellar and floor-to-ceiling windows that opens to the breathtaking terrace overlooking the state-of-the-art mega yacht marina and turquoise blue waters,” that listing states. “The terrace is an entertainer’s dream, with a full kitchen, plunge pool and large family table.” 

Albany itself is a “600-acre exclusive luxury community” with a golf course, equestrian activities, full-service spa, among other amenities, according to the listing.

Old Fort Bay Lot A

Over $16 million was spent on “Old Fort Bay Lot A,” according to the report. Though it’s not clear which lot is the one Bankman-Fried bought, others in the area boast homes with expansive outdoor pools close to the water’s edge, according to Sotheby’s International Reality.

That site was sold to Bankman-Fried on April 7, 2022, according to the report. 

The listings were part of a 33-page report released on Monday detailing the commingling and misuse of customer deposits at the now bankrupt exchange. Customers are owed about $8.7 billion. 

“The image that the FTX Group sought to portray as the customer-focused leader of the digital age was a mirage,” FTX CEO and chief restructuring officer John J. Ray lll said in a statement. “From the inception of the FTX.com exchange, the FTX Group commingled customer deposits and corporate funds, and misused them with abandon at the direction and by the design of previous senior executives.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

CFTC’s complaint against Binance seeks permanent trading and registration bans, and other details


The Commodity Future Trading Commission on Monday filed a civil complaint in U.S. federal court against crypto giant Binance, its founder and CEO Changpeng "CZ" Zhao, and executive Samuel Lim. The complaint largely focuses on allegations of unregistered commodities trading in the U.S., but could have broader implications for both Binance and the digital asset industry

As part of its suit, the CFTC wants injunctions that could effectively bar Binance and its affiliates, as well as Zhao and Lim, from the U.S. commodities industry, as well as disgorgement of salaries, profits and other benefits or earnings made. The request for a federal order doing this is on the grounds that Binance has violated several laws and regulations governing commodities in the U.S., including failure to combat money laundering on its platform — a charge that could be accompanied by criminal prosecution.

The CFTC cites a number of private communications and company documents throughout the complaint to support its argument

In response to the news Zhao initially tweeted "4", his code for reporting or "attacks" he does not agree with, followed by a statement on Binance’s website refuting much of the complaint. 

"The complaint filed by the CFTC is unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years," a Binance spokesperson said in a separate statement provided to The Block. "We have made significant investments over the past two years to ensure we do not have U.S. users active on our platform, including increasing compliance personnel from "approximately 100" to "around 750 core and supporting compliance personnel today," the spokesperson said. 

The Securities and Exchange Commission has probed a related Binance product called Binance USD, which the exchange worked on with Paxos. It is not clear yet on whether the agency will bring its own charges.  

The Justice Department could decide to bring criminal charges against Binance. A person close to the CFTC investigation noted that Binance is also the subject of scrutiny by the DOJ.

Here are seven other major takeaways from the CFTC’s lawsuit against Binance.  

Binance may have known that it facilitates illegal transactions – and not cared.    

Some of the most most damaging allegations for Binance are buried in the CFTC’s filing: That Binance may have knowingly facilitated transactions by organized crime and terrorist organizations. The CFTC cites internal chat logs that include then-Chief Compliance Officer Lim and a money laundering reporting officer.  

“Internally, Binance officers, employees, and agents have acknowledged that the Binance platform has facilitated potentially illegal activities,” the complaint said. “For example, in February 2019, after receiving information ‘regarding HAMAS transactions’ on Binance, Lim explained to a colleague that terrorists usually send ‘small sums’ as ‘large sums constitute money laundering.’ Lim’s colleague replied: ‘Can barely buy an AK47 with 600 bucks.’ And with regard to certain Binance customers, including customers from Russia, Lim acknowledged in a February 2020 chat: ‘Like come on. They are here for crime.’ Binance’s [money laundering reporting officer] agreed that ‘we see the bad, but we close 2 eyes.’" 

In another instance, “a Binance employee wrote to Lim and another colleague asking if a customer whose recent transactions ‘were very closely associated with illicit activity’ and ‘over 5m USD worth of his transactions were indirectly sourced from questionable services’ should be off-boarded or if it was in the class of cases ‘where we would want to advise the user that they can make a new account.’”  

According to the CFTC, Lim advised via internal chat: “Can let him know to be careful with his flow of funds, especially from darknet like hydra,” adding, “He can come back with a new account But this current one has to go, it’s tainted.”  


Binance in 2019 updated its terms of use to include that Binance could not “provide services to any U.S. person.” That same year, Binance said it was beginning to block customers based on their internet protocol, or IP, address.  

“In reality, Binance simply added a pop-up window on its website that appeared when customers attempted to log in from an IP address associated with the United States,” the CFTC said.  

The pop-up did not stop customers from logging in to their accounts, making deposits or trading, the agency said, and instead asked them to “self-certify” that they were not in the U.S.  

Binance’s IP address compliance controls, also called “geofencing,” were not effective in preventing customers from “restricted jurisdictions,” including the U.S. That could be because Binance told U.S. customers to evade controls through using VPNs to hide their locations, the CFTC said.  

A “Beginner’s Guide to VPNs,” was published in 2019, which explained to customers how to use a VPN, the agency said.  

At one point, when Paxos asked Binance to go through a compliance audit, a “money laundering reporting officer” at Binance sent a message to Lim saying, “I HAZ NO CONFIDENCE IN OUR GEOFENCING.” 

The complaint claims that at least three U.S.-based or owned trading firms used Binance, meaning that the alleged violations went beyond normal consumer accounts. The firms are not directly identified, but described in some detail. 

VIP Program 

Binance maintains a “VIP” program for large accounts that includes quicker trades and prompt notification and advice if law enforcement asks about or targeted their funds, the CFTC alleged.  

“Binance is aware of its VIPs’ identities and geographic locations because Binance monitors its sources of transaction volume and fee-based revenue as a matter of course in conducting its operations,” the complaint said.  

An “important benefit” of the program is “prompt notification of any law enforcement inquiry concerning their account,” which the CFTC says Lim created on direction from Zhao.  

Binance’s VIP team was to, “contact the user through all available means (text, phone) to inform him/her that his account has been frozen or unfrozen,” as soon as the funds were frozen or unfrozen, the complaint said. “Do not directly tell the user to run, just tell them their account has been unfrozen and it was investigated by XXX. If the user is a big trader, or a smart one, he/she will get the hint.” 

Binance employees also use Signal to communicate, which the agency said Zhao and others used “with its auto-delete functionality enabled” for business communications, “even after Binance received document requests from the CFTC and after Binance purportedly distributed document preservation notices to its personnel.” The complaint noted that the auto-delate function may allow users “to cover their tracks after communicating about inculpatory matters.” 

Regulators aren’t convinced that Binance.US is separate from Binance 

Count the CFTC among those skeptical that Binance and Binance.US are all that different.  

California-based BAM Trading operates Binance.US. BAM Trading also is owned and controlled by Zhao and has never been registered with the agency, the complaint said.  

When he hired BAM Trading’s first CEO, Zhao described Binance as a pirate ship and explained that he wished for Binance.US to be a navy boat,” the CFTC said.  

A spokesperson for Binance.US declined to comment.  

The marketing and branding of both Binance.US and Binance.com were similar, the agency added.  

Binance also relied “on a maze of corporate entities,” in a way that appears to echo FTX’s complex international structure, which came to full light following that crypto giant’s failure. The agency argues Binance’s wide range of corporate entities was deliberate to hide the location of the Binance platform and confuse outsiders.   

“Binance is so effective at obfuscating its location and the identities of its operating companies that it has even confused its own Chief Strategy Officer,” the CFTC said.  

Locations were also muddied when the agency tried to find Lim’s address as part of issuing him a subpoena.  

Trading against customers 

Binance kept approximately 300 “house accounts” that traded on the platform and were “directly or indirectly owned by Zhao,” in addition to accounts owned by two other entities controlled by him, Merit Peak and Sigma Chain, and two other Zhao-managed individuals accounts on the platform.  

“Binance does not disclose to its customers that Binance is trading in its own markets in its Terms of Use or elsewhere,” the CFTC said. “Consistent with its apparent attempt to keep its proprietary trading activity on its own markets top secret, Binance has refused to respond to Commission-issued investigative subpoenas seeking information concerning its proprietary trading activity on Binance, including transaction data and communications among the members of the Binance ‘quant desk.’” 

The CFTC could not find information or reason to believe that Binance ran any of those “house accounts” through any anti-fraud or anti-market manipulation surveillance or controls, and the accounts are considered exempt from a “relatively new ‘insider trading’ policy.” 

In a statement issued late Monday EDT, Zhao said: "Binance.com does not trade for profit or ‘manipulate’ the market under any circumstances. Binance ‘trades’ in a number of situations. Our revenues are in crypto. We do need to convert them from time to time to cover expenses in fiat or other cryptocurrencies. We have affiliates that provide liquidity for less liquid pairs. These affiliates are monitored specifically not to have large profits."

With regards to his personal activity, he added: "Personally, I have two accounts at Binance: One for Binance Card, one for my crypto holdings. I eat our own dog food and store my crypto on Binance.com. I also need to convert crypto from time to time to pay for my personal expenses or for the card."

CZ is directly implicated in multiple ways 

Zhao is named as a defendant and singled out repeatedly throughout the complaint.  

The agency said Zhao has directly or indirectly owned all of Binance’s corporate entities and “answers to no one but himself” as Binance has no board of directors.  

At points some of the 120 entities, including Binance Holding and holding companies Binance IE and Binance Services, had commingled funds and shared infrastructure, the CFTC said, and that in addition to controlling the Binance network, Zhao “directly approves products.” 

Zhao has even paid for some of Binance’s Amazon Web Services accounts with his personal credit card, the CFTC said. “Zhao also involves himself in the minutiae of Binance’s operations. For example, Zhao personally approved an approximately $60 expense related to office furniture in January 2021, a month in which Binance earned over $700 million in revenue.” 

As Binance grew, Zhao hired a senior management team, but he continued to be involve himself in and retain control “over all critical decisions for the enterprise,” the complaint said, “including which products to offer and whether and how to implement and enforce anti-money laundering (“AML”) controls and Know Your Customer (“KYC”) procedures.” 

“Zhao is ultimately responsible for evaluating the legal and regulatory risks associated with Binance’s business activities, including those related to the launch of Binance.US, and has been directly involved in discussions with compliance consultants and lawyers concerning legal and regulatory issues implicated by Binance’s business activities,” the CFTC argued.  

Zhao, Lim, and other members of Binance management received periodic updates that included information about Binance’s U.S. customers “and the effectiveness of Binance’s efforts to capture the U.S. market,” the CFTC alleged.  

CFTC says Binance USD and Litecoin are commodities  

The agency named several digital assets traded on Binance as commodities, including Litecoin, ether, USDT and Binance USD.  

Binance USD, or BUSD, came under scrutiny more than a month ago after crypto service provider Paxos received notice of an investigation into a joint stablecoin offering it had with Binance.  

Paxos also was mentioned in the complaint on Monday. The CFTC said Binance tried to hide how ineffective its compliance program was from its business partners, including Paxos. In 2020, Binance went through a compliance audit to “satisfy a request from Paxos.”  

“But according to Lim, Binance purposely engaged a compliance auditor that would ‘just do a half assed individual sub audit on geo[fencing]’ to ‘buy us more time,’” the CFTC wrote in the complaint.  

Litecoin has been less in the spotlight as to whether it is a security or a commodity, but the CFTC seems to conclude that it is a commodity.  

Ether, in particular, has been met with diverging views from other regulators. Securities and Exchange Commission Chair Gary Gensler, along with New York Attorney General Letitia James have implied that ether is a security. James said ether was a security in a lawsuit against crypto exchange KuCoin earlier this month. However, CFTC Chair Rostin Behnam has said it is a commodity.  

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.