Token grants under scrutiny again following allegations that former Celsius CEO embezzled $42 million
According to the US Justice Department, Alex Mashinsky, the former CEO of bankrupt crypto lender Celsius, allegedly manipulated the price of the company’s CEL tokens to his advantage. Mashinsky, along with the help of the former chief revenue officer, Roni Cohen-Pavon, is accused of buying millions of dollars worth of CEL tokens without disclosing the purchases publicly in order to keep the company afloat. They also allegedly caused Celsius to use customer deposits to buy CEL and boost its price. Mashinsky reportedly sold the tokens at inflated prices, netting approximately $42 million, while Cohen-Pavon made $3.6 million.
Mashinsky has been arrested and charged with seven counts, including wire fraud and securities fraud. If convicted, he could face up to 65 years in prison. The manipulation of a company’s own cryptocurrency is not new, as demonstrated by the case of Caroline Ellison, the former CEO of FTX’s trading arm, who was accused by the Securities and Exchange Commission of fixing the price of the now-bankrupt crypto exchange’s native coin, FTT.
The manipulation of crypto tokens is not surprising, as they are often used by crypto companies to raise money and reward executives and investors. However, these tokens are prone to abuse and manipulation. Unlike traditional equity stakes, crypto tokens can be immediately sold in the open market, allowing for massive profits regardless of the company’s success. This creates incentives for companies to hype up the value of the token and quickly sell their tokens.
The manipulation of CEL by Celsius and Mashinsky highlights the vulnerability of crypto tokens to abuse. While the issuance of tokens can incentivize employees and investors, it also opens the door for manipulation and fraudulent activity. The case underscores the need for greater regulation and oversight in the crypto industry to protect investors and ensure the integrity of the market.