Founder of Bankrupt Crypto Firm Celsius Arrested on Fraud Charges

Alex Mashinsky, the founder and former chief executive of the bankrupt cryptocurrency firm Celsius, was arrested on Thursday and charged with fraud, federal prosecutors said.

Mr. Mashinsky was also sued by the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Trade Commission. Under a settlement with the F.T.C., Celsius agreed to pay $4.7 billion in restitution to the firm’s customers, although the process of paying that total was suspended while the bankruptcy unfolds.

Mr. Mashinsky was arrested at his home in New York, a person close to the investigation said. The charges against him include wire fraud, commodities fraud and manipulation of securities prices.

Before it collapsed last year, Celsius rose to prominence as a kind of crypto bank that promised customers sky-high interest rates and handled tens of billions of dollars in deposits. As its charismatic pitchman, Mr. Mashinsky appeared in YouTube videos where he claimed that Celsius was a safer, more egalitarian alternative to traditional banks.

At its peak, Celsius controlled about $25 billion in crypto assets. But last summer, Celsius collapsed and filed for bankruptcy amid a broader implosion in the crypto markets. In the process it devastated its more than 500,000 customers, many of whom lost their savings.

The authorities said the company and Mr. Mashinsky repeatedly lied to investors about its business model and how it made money. It even lied about the number of customers it had and wrongly told investors that their deposits were insured.

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