The Commodity Futures Trading Commission (CFTC) has concluded its investigation into bankrupt crypto lender Celsius and its former CEO, Alex Mashinsky, and found that they violated United States rules, according to sources familiar with the matter. 

The investigation, conducted by attorneys in the CFTC’s enforcement unit, revealed that Celsius misled investors and failed to register with the regulatory body.

If the majority of the CFTC’s commissioners agree with these findings, the agency could file a case in federal court as early as this month.

The findings of the investigation shed light on the actions of Celsius and its former CEO, raising questions about their compliance with regulatory requirements. It is alleged that Celsius engaged in deceptive practices and failed to provide accurate information to investors.

By misleading investors, the lending platform potentially put their funds at risk and undermined market transparency. Furthermore, the failure to register with the CFTC raises concerns about the company’s adherence to regulatory oversight.

The independent examiner appointed during Celsius’ bankruptcy case further shed light on the company’s operations. The examiner found that Celsius had operated in a manner similar to a Ponzi scheme, which raised concerns about the company’s business practices and its impact on investors. This finding adds weight to the allegations against Celsius and strengthens the case for regulatory action.

The potential case against Celsius and its ex-CEO has significant implications for the crypto industry and regulatory enforcement. If the CFTC proceeds with the lawsuit, it would signal a strong stance on holding companies accountable for their actions and ensuring investor protection in the cryptocurrency market.

When Celsius filed for voluntary bankruptcy in July 2022, the lending company reportedly owed between $1 billion and $10 billion to creditors. The case is currently ongoing at the United States Bankruptcy Court for the Southern District of New York.

The allegations against Celsius and its former CEO highlight the need for increased regulatory scrutiny and oversight in the crypto sector. As the market continues to grow and attract more participants, it is crucial to establish clear guidelines and enforce compliance to protect investors and maintain market integrity.

Nevertheless,  the potential case against Celsius demonstrates the commitment of regulatory authorities to uphold these standards and address violations that occur within the industry.

This case could serve as a precedent for future enforcement actions, shaping the regulatory landscape for the industry as a whole.

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