Krissy Meehan (formerly Krissy Mashinsky) and Alex Mashinsky are well-known for their connections to the failed and allegedly fraudulent crypto lender Celsius Network. Less thoroughly investigated, however, has been their role with Strong Blockchain, a brand name used for several different products led by the pair and related to e-commerce marketplace USA Strong. 

Strong Blockchain is described as a “decentralized, community-driven platform that allows users to verify the authenticity of products made in the USA.” Meehan confidently stated on X (formerly Twitter) that “The verification of Americas [sic] Supply Chain = more jobs & a stronger local economy.” 

Mashinsky listed himself as chairman of USA Strong on his LinkedIn, with Strong Blockchain at one point tweeting that it was “so great full [sic]” for his leadership (it later corrected the spelling and made sure to tag him). USA Strong told Protos that “Mashinsky is not Chairman.” Meehan was the firm’s chief exec.

Mashinsky took advantage of his role as the then-CEO of Celsius to promote the Strong Blockchain product, mentioning it in Celsius videos. He has since been charged with a variety of felony financial crimes related to his conduct while at the firm.

Read more: Blockfolio and Celsius PPP loans forgiven before bankruptcy

On the Strong Blockchain app, you can see a post that was apparently posted on March 30, 2022, that brags that “Strong Blockchain is live” and encourages firms to verify products. Previous tweets from the since rebranded ‘strongblkchain’ X accounts also noted the official launch of the product in early 2022.

However, there currently appear to be zero verified manufacturers. The ‘Recently verified products’ section of the application has most recently been used for ‘latest test producut [sic]’ and ‘Test Product,’ both from the ‘Latest Test Company.’

A trip to the OpenSea profile linked on the USAMADE website shows a ‘USAMADE’ collection that doesn’t include any of the NFTs that are supposed to be issued to verified businesses. It does, however, include pieces clearly inspired or nearly wholesale copied from copyrighted works. The USAMADE spinner NFT is currently owned by ‘WEB3STRONG,’ also associated with USA Strong. 

Some firms have previously been verified, like Humid Outside, but its verification expired on December 15, 2022. The website for Humid Outside also seems to indicate that it hasn’t yet launched. Humid Outside, LLC, which is based in the same Florida town as the Strong Blockchain-verified entity, appears to have been dissolved in 2022.

USA Strong provided Protos with an additional profile when we requested information, for luxury candle company Thompson Ferrier. However, on closer inspection, that verification expired in August. Protos pointed out this was expired and requested a current profile from USA Strong, to which it replied, “The important point for us is the data was valid at that time.” Protos has been unable to identify a single firm that is currently verified by this product. 

Reviewing the Humid Outside profile in more detail, it appears that it wasn’t verified using the NFT method currently described on the website but instead relied on a separate type of transaction on Ethereum. The address, which is verified for Humid Outside, is the same address that was ‘verified’ in this manner for Thompson Ferrier.

The USA Strong address, which was performing these verifications was also interacting with the CEL token. 

It’s important to highlight that despite these various connections to Celsius, a currently bankrupt firm accused of fraud, USA Strong, wasn’t included in that bankruptcy.

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Alex Mashinsky, the former Celsius Network CEO, has reportedly been arrested and indicted today by the Department of Justice (DoJ) for wire fraud, market manipulation, commodities fraud, and securities fraud. Former Celsius chief revenue officer Roni Cohen-Pavon was indicted alongside Mashinsky.

Mashinsky and Celsius Network were also sued today by the Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC). This comes exactly one year after the company filed for bankruptcy. 

The criminal indictment claims that Mashinsky and Cohen-Pavon engaged in a scheme to raise the price of CEL, the token issued by Celsius. It’s alleged that Mashinsky misrepresented the solvency, safety, and success of Celsius Network to investors and that both Mashinsky and Cohen-Pavon used hundreds of millions of dollars to purchase CEL in order to artificially inflate the price. This allowed them to cash out their own holdings and personally reap millions in proceeds.

Read more: Celsius to sell crypto platform amid Mashinsky court battle

According to the indictment, Mashinsky made approximately $42 million from his sales, and Cohen-Pavon made around $3.6 million. Mashinsky, at one point, stated in an internal email describing the effort to “protect” the CEL price that it’s “a win-win scenario, the only we loose [sic] is if CEL price drops a lot and people get nervous and keep selling. We can protect against this scenario.”

The indictment highlights several of Mashinsky’s public misrepresentations, including how he regularly misrepresented how much was made from the CEL ICO. He claimed that it sold out and made over $50 million, however, Celsius apparently only raised $32 million and then entered into a “token sale agreement” with Mashinsky to purchase the remaining CEL through an entity he controlled. Payment was never remitted.

Eventually, this “token sale agreement” was converted into a “loan agreement,” which led to other executives resigning because of the conflicts in the transaction.

Eventually, this was converted into a new, superseding “loan agreement,” which required Mashinsky to post some of his Celsius equity. Mashinsky allegedly failed to repay the loan, leading to Celsius taking these originally unsold CEL tokens back into the Celsius treasury. This entire series of transactions occurred with no disclosure to investors in CEL that the stated sale amount was inaccurate.

Indictment claims Mashinskly fudged Celsius’s books

Mashinsky also allegedly made regular misrepresentations about Celsius’s financials, including profitability, sustainability, solvency, trading strategy, insurance, collateralization of loans, counterparty defaults, and losses of assets. The indictment alleges that the executives were aware in 2021 of a “hole” in the books that was caused by using Bitcoin deposited by customers to purchase CEL with the goal of increasing the price of CEL.

Mashinsky also repeatedly represented in public that Celsius didn’t make directional trades; the indictment alleges it explicitly had accounts labeled “Directional1” and “Directional2” and that, at times, Mashinsky personally took over the trading desk, overriding concerns from the firm’s risk department in a series of trades that lost it tens of millions of dollars.

This led to one employee messaging another to ask, “At what point do we seek outside intervention to get the thing under control?”

Read more: Independent examiner finds Celsius ticks every Ponzi box

Similarly, Mashinsky represented publicly and in interviews that Celsius only had over-collateralized loans. The indictment alleges that unsecured loans made up nearly 40% of the company’s’ portfolio. One executive warned Mashinsky about these statements, saying, “This is not true, and we cannot say that.”

The indictment further alleges that in the weeks leading up to Celsius’s closing withdrawals, Mashinsky personally withdrew the lion’s share of assets he had on the platform while stating publicly, “We’re in it together.”

Celsius Network has entered into a non-prosecution agreement with the DoJ surrounding the allegations in the indictment. 

The FTC case names Mashinsky as well as former chief technology officer Hanoch ‘Nuke’ Goldstein, co-founder Shlomi Daniel Leon, and other Celsius entities in a lawsuit that alleges deception in marketing and unfair misappropriation of assets.

Meanwhile, the SEC case names Mashinsky and Celsius in a lawsuit that alleges securities fraud and the unauthorized offer and sale of securities. The SEC specifically names both CEL and the Earn program as securities in the suit.

The CFTC case names Mashinsky and Celsius in a lawsuit that alleges commodities fraud, commodity pool fraud, failure to register as a commodity pool, and failure to provide required disclosure.

These allegations come one year after Celsius plunged into bankruptcy after its apparent insolvency grew too large to deny. The firm was once a well-respected crypto company, with industry-leading stablecoin Tether leading a Series A investment round and offering Celsius a series of loans. One former Celsius trader, Jason Stone, previously alleged that these loans were meant to “cover up” the fact that Celsius was already insolvent.

The New York Attorney General is also suing Mashinsky.

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Celsius founder Alex Mashinsky has filed an entertaining motion to dismiss New York Attorney General (NYAG) Letitia James’ lawsuit. NYAG is suing Mashinsky for operating an unregistered securities and commodities broker-dealer and defrauding investors out of hundreds of millions of dollars. Over 26,300 New York residents used Celsius Network.

Mashinsky, in an emotionally-charged retort, clapped back against almost all of her claims, claiming NYAG “parrots misinformation” with “baseless conclusions.” Instead of accepting responsibility for one of the largest frauds in crypto history, Mashinsky asserts that “circumstances outside of his (and Celsius’s) control led to a liquidity squeeze that resulted in Celsius pausing withdrawals and filing for bankruptcy.”

NYAG alleges Mashinsky misrepresented Celsius Network’s financial health and downplayed its exposure to FTX and Do Kwon’s Terra LUNA. NYAG’s case cites Mashinsky’s positive statements about Celsius’ ostensibly prudent, low-risk approach to finance. 

In reality, independent examiner Shoba Pillay detailed Celsius’ myriad similarities to a Ponzi scheme in a 476-page report produced for the US Bankruptcy Court for the Southern District of New York.

Mashinsky claims Celsius Network collapsed due to circumstances beyond his control. Celsius had invested heavily in projects by Do Kwon and Sam Bankman-Fried which, according to Mashinsky’s motion to dismiss, were impossible to identify as fraudulent prior to their collapse.

Terra USD (UST) experienced a spectacular meltdown in May 2022. It also used underhanded tactics such as depositing customers’ funds to Do Kwon’s Anchor Protocol, which the Terra USD meltdown wiped out.

Alex Mashinsky says Celsius was not a Ponzi scheme

Mashinsky’s motion to dismiss also claims the NYAG’s complaint parroted inaccurate information that had spread online and misrepresented its business model. He claims his descriptions of Celsius Network’s safety practices were mere “puffery,” and never meant to be taken seriously.

NYAG disagrees, citing the CEO’s statements as information on which a reasonable investor would rely when making an investment decision.

Read more: Celsius to sell crypto platform amid Mashinsky court battle

“Instead of acknowledging that Celsius’s eventual downfall was caused by a series of calamitous, external events, the NYAG pins all resulting losses on the alleged misstatements of Mashinsky,” he bemoaned.

Furthermore, Mashinsky says the NYAG failed to list any securities or commodities on the Celsius Network’s platform in her complaint. At least 40 state securities regulators investigated Celsius for violations. New Jersey and several additional state regulators have accused the company of offering unregistered securities.

Mashinsky also claims that Celsius Network was never subject to New York’s Martin Act, passed by legislators to deter fraud.

New York Attorney General Letitia James alleges that fraud played a major role in Celsius Network’s collapse. Founder Alex Mashinsky denies most responsibility. Overall, he claims he is a victim of circumstances beyond his control. He blames NYAG for taking his verbal statements out of context. Mashinsky has filed a motion to dismiss the lawsuit against him in Manhattan.

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The post Alex Mashinsky hints Do Kwon and SBF caused Celsius bankruptcy appeared first on Protos.

Now-bankrupt Ponzi scheme Celsius Network has reached a deal with NovaWulf Digital Management LP to sell its crypto platform, in an ongoing bid to refund customers.

Celsius must still seek the approval of bankruptcy court, as well as the blessing of the majority of its customers, before the deal can go through. If all goes to plan, users can expect a share of their trapped crypto on the platform to be returned in bitcoin and ether.

Celsius currently has a $1.2 billion hole in its balance sheet. It’s seeking to recover hundreds of millions it claims to have lost at the hands of its founder and former chief exec, Alex Mashinsky. Celsius and its creditors have filed initial court documents against Mashinsky, alleging he mismanaged the firm, inflated native token CEL for personal gain, and made “negligent” investments before it went bankrupt in July.

Read more: FTX and Tether were closer to Celsius than anyone realized

The lengthy legal document cites billions transferred to DeFi platform KeyFi — partly owned by Mashinsky — for speculative investments. Celsius claims it lost $200 million from that move. The company also transferred $12 million to AM Ventures and $5 million to Koala LLP, two entities controlled and owned by Mashinsky.

Additionally, creditors allege that $2.8 million was transferred fraudulently by Mashinsky into his own wallet in May.

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