- within Consumer Protection topic(s)
- in United States
The Federal Trade Commission recently announced settlements requiring three co-founders of cryptocurrency platform Celsius Network (Celsius) to pay a total of $16.5 million to resolve claims arising from the agency’s 2023 enforcement action against Celsius and its executives. The settlements also impose permanent restrictions on the executives’ ability to market or sell certain financial and cryptocurrency-related products and services.
The settlements resolve the FTC’s remaining claims against Celsius’ co-founders following the company’s 2023 settlement with the agency. Under that earlier settlement, Celsius agreed to a $4.7 billion monetary judgment, which was suspended to permit the company to return its remaining assets to consumers through bankruptcy proceedings, as well as broad injunctive relief restricting its future business activities.
The Allegations
In July 2023, the FTC filed a complaint in federal court against Celsius and three of its co-founders: former Chief Executive Officer Alexander Mashinsky, former Chief Strategy Officer Shlomi Daniel Leon, and former Chief Technology Officer Hanoch “Nuke” Goldstein. Celsius marketed a variety of cryptocurrency products and services to consumers, including interest-bearing accounts, loans secured by cryptocurrency assets, and cryptocurrency sales and exchange services.
According to the FTC, Celsius and its executives marketed the platform as a safer alternative to traditional financial institutions and represented, among other things, that consumers could withdraw their cryptocurrency at any time, Celsius maintained sufficient reserves to meet customer obligations, consumer deposits were covered by a $750 million insurance policy, and Celsius did not make unsecured loans.
The FTC alleged that those representations were false. According to the complaint, Celsius misappropriated more than $4 billion in consumer cryptocurrency deposits and used consumer assets to fund company operations, pay rewards to other customers, make loans, and pursue high-risk investments. The FTC also alleged that Celsius routinely made unsecured loans, lacked sufficient liquid reserves to satisfy customer withdrawals, and did not maintain the $750 million insurance policy it advertised. As Celsius’s financial condition deteriorated, its executives allegedly continued representing that customer deposits were safe until shortly before Celsius froze customer withdrawals and later filed for bankruptcy.
The FTC asserted three principal theories of liability. First, it alleged that misrepresentations concerning Celsius’s products and financial condition constituted deceptive acts or practices in violation of Section 5 of the FTC Act. Second, it alleged that Celsius’ misappropriation of consumer cryptocurrency deposits constituted an unfair practice under Section 5. Third, the FTC alleged that the defendants violated Section 521 of the Gramm-Leach-Bliley Act (GLBA) by making false, fictitious, or fraudulent representations to obtain or attempt to obtain customer financial information, including bank account numbers and cryptocurrency wallet addresses.
The Settlements
Celsius settled the FTC’s claims against the company in 2023. Under that settlement, Celsius agreed to a $4.7 billion monetary judgment, which was suspended to permit the company to return its remaining assets to consumers in bankruptcy proceedings. Celsius and its affiliated companies were also permanently prohibited from offering, marketing, or promoting products or services that can be used to deposit, exchange, invest, or withdraw assets.
The FTC’s 2026 settlements resolve its claims against the three individual co-founders. Mashinsky agreed to a $10 million monetary judgment, Leon agreed to a $4.1 million judgment, and Goldstein agreed to a $2.4 million judgment, for a total of $16.5 million.
The settlements also impose significant injunctive relief. Mashinsky and Leon are permanently prohibited from marketing or selling products or services that can be used to deposit, exchange, invest, or withdraw assets. Goldstein is permanently prohibited from marketing or selling retail products or services that can be used to buy, sell, deposit, withdraw, distribute, or trade cryptocurrency.
The orders also prohibit the former executives from making certain misrepresentations concerning products or services and from violating the GLBA by using false, fictitious, or fraudulent representations to obtain customer financial information. The orders applicable to Mashinsky and Leon additionally restrict their disclosure of consumers’ nonpublic personal information without express informed consent.
Takeaways for Businesses
The settlements highlight the FTC’s willingness to pursue individual executives for alleged consumer protection violations and to seek substantial personal monetary judgments and injunctive relief. They are particularly notable because the FTC continued pursuing the individual defendants for several years after reaching a settlement with Celsius itself.
The case also illustrates the potential enforcement risks associated with representations concerning the safety and availability of consumer assets. Statements about reserves, liquidity, insurance coverage, withdrawal rights, expected returns, lending practices, and the custody or ownership of consumer assets may create significant regulatory exposure when they are inconsistent with a company’s actual financial condition or business practices.
Fintech companies, digital asset providers, and other emerging technology companies should consider reviewing marketing materials and customer communications to confirm that representations concerning product features and consumer funds are accurate, appropriately substantiated, and consistent with actual business practices. Companies may also wish to ensure that marketing, legal, compliance, finance, and risk personnel have processes for identifying when changing financial or operational conditions render existing consumer-facing representations inaccurate or misleading.
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