Three Celsius Founders Permanently Barred from Crypto Business, May Not Have to Pay a Single Cent of $16.5 Million Fine

Author: CryptoSlate

Compiled by: TechFlow

TechFlow Insights: The three founders of the bankrupt Celsius have been permanently banned by the FTC from engaging in core businesses such as crypto deposits, withdrawals, and trading. This ban is more deadly than the $16.5 million fine—it follows them personally, inescapable even if they switch companies. More ironically, the fine can be offset by assets previously confiscated by the Department of Justice and funds from bankruptcy liquidation, meaning they might not have to pay a single cent out of pocket.

The co-founders of the bankrupt crypto lending platform Celsius now face permanent court injunctions, prohibiting them from engaging in most areas of crypto and asset service businesses.

The FTC set the combined obligation for the founders at $16.5 million, though Goldstein's judgment specifies $2.014 million.

Alexander Mashinsky and Shlomi Daniel Leon are prohibited from advertising, marketing, promoting, offering, or distributing products or services used for depositing, exchanging, investing, or withdrawing assets, nor may they assist in such activities.

Mashinsky's ban covers general assets, while Leon's ban explicitly covers cryptocurrencies, banking, and financial assets. Both injunctions apply whether they act directly or through intermediaries.

Goldstein's ban focuses on retail crypto business. He is prohibited from advertising, marketing, promoting, or selling retail products or services used for buying, selling, depositing, withdrawing, distributing, or trading cryptocurrencies, nor may he assist in such sales and marketing activities.

All three injunctions also prohibit making material misrepresentations about products and services. The injunctions forbid obtaining or attempting to obtain customer information from financial institutions through false, fictitious, or fraudulent statements, including bank account details, login credentials, private keys, and wallet information.

Mashinsky and Leon must also obtain explicit informed consent before disclosing consumers' non-public personal information.

These restrictions align with the conduct alleged in the FTC's 2023 complaint. The agency alleged Celsius was marketed as safer than banks, promising withdrawals at any time, and advertising yields as high as 18.63%.

The FTC also alleged that the company claimed to have sufficient reserves on June 7, 2022, yet froze withdrawals and transfers five days later. Celsius filed for bankruptcy on July 13, 2022.

These injunctions follow the founders, extending beyond Celsius, and also cover assistance they provide to others. The injunctions for Mashinsky and Leon also extend to work completed through intermediaries.

In the coming years, the founders must submit reports and maintain records, leaving tracking trails for the FTC and providing the court with a basis for enforcing the injunctions. These injunctions apply to all three founders, demonstrating how consumer protection cases impose lasting restrictions on marketing custody, yields, and trading products.

Payments made through Department of Justice confiscations and Celsius bankruptcy settlements can be credited toward the $16.5 million obligation.

Mashinsky's $10 million obligation can be satisfied through eligible Department of Justice confiscations. Leon's $4.1 million obligation and Goldstein's $2.014 million obligation can be offset through payments or waivers in the Celsius bankruptcy proceedings.

The legal channels are separate but economically overlapping; these injunctions do not guarantee that Celsius creditors will receive additional compensation.

Funds actually received by the FTC may be used for consumer compensation or related relief, and funds not used for relief will be deposited into the U.S. Treasury.