Texas State Securities Board filed a notice to hear Alexander Mashinsky (CEO of Celsius Network),

The hearing is being conducted via videoconference in order to decide whether or not to issue a request for decision on the entry CEASE AND DISEIST ORDER, a order ASSESSING AN ADMINISTRATIVE FOINE, and an ordering for PAYING RESCUES against Alexander Mashinsky.

Celsius Network, Inc., Celsius Network Limited, Celsius US Holding, LLC, Celsius Network, LLC, Celsius Lending, LLC, Celsius US Holding, LLC, Celsius Network, LLC, Celsius Network, LLC, Celsius US Holding, LLC, Celsius Network, LLC, Celsius Network, LLC, Celsius US Holding, LLC, Celsius Network Lending, LLC, all of which were controlled by Mashinsky, claimed to generate cryptocurrency trading, lending, investing, and borrowing, in addition to engaging in proprietary trading, mining, or other types of transactions

Celsius Network, part of which was illegally funding lending operations, proprietary trading and other business by selling unregistered securities under the name of cryptocurrency interest-earning account, has sold some of these securities.

Celsius Network refers to the unregistered cryptocurrency interest-earning accounts as Celsius Network’s “Earn Rewards” program. They permitted Texans and other investors at least eighteen years old to apply to invest in Earn Accounts through Celsius Network’s website or smartphone application. Earn Accounts could have been used by as many as 17,000 Texans.

To open accounts, investors transferred eligible cryptocurrency to Celsius Network in order to invest in Earn Accounts. Investors relinquished control over their cryptocurrency and the Celsius Network took full legal and beneficial ownership of the investors’ cryptocurrency.

On June 11, 2022, a member of the public referred to herein as “Mike” posted a message on social media that claimed he was “hearing about [EARN] accounts being locked” and that he “hope[d] retail can get out.”

Mashinsky also posted a response via social media on the same day. It read:

Mike, do you know anyone who has difficulty withdrawing from Celsius? [sic]

Why spread FUD and misinformation. [sic]

If you are paid for this then let everyone know you are picking sides otherwise our job is to fight Tradfi together…

Although Respondent’s public response suggested Celsius Network was not freezing Earn Accounts, the very next day, on June 12, 2022, Celsius Network froze Earn Accounts. Respondent and Celsius Network announced the freeze together via the website of Celsius Network, a blog and social media.

Celsius US Holding, LLC, Celsius Networks Lending, LLC, Celsius Network, LLC, Celsius Network, Inc., Celsius Mining, LLC, Celsius Lending, LLC, Celsius KeyFi, LLC, and Celsius Network, Inc. filed Chapter 11 bankruptcy at the United States Bankruptcy Court of the Southern District of New York on July 13, 2022.

Celsius Network was not licensed in Texas as a Money Service Business and could not lawfully carry out currency exchange or money transmission activities according to Chapter 151 of Texas Finance Code.

The Securities Investor Protection Corporation, also known as the SIPC (a non-profit, federally mandated, member-funded United States corporation) did not protect Earn Accounts. This was a result of the Securities Investor Protection Bill of 1970 which requires US-registered brokers-dealers to be members.

Earn Accounts weren’t insured by Federal Deposit Insurance Corporation, also known as FDIC.

The Enforcement Division requests a decision to allow Respondent to immediately cease and desist in violation of Sections 4003.001 & 4004.051 of Securities Act. Respondent must also immediately cease and desist in engaging in fraud related to the sale or purchase of securities in Texas.

The Enforcement Division has also requested that the Honorable Administrative Law Judgment issue a proposal for decision directing Respondent to pay a principal refund to Texans who invested unregistered Earn Accounts according to Section 4007.108(a) of the Securities Act.

Further, the Enforcement Division prays for a proposal to decide on an order that imposes an administrative fine against Respondent under Section 4007.106. This prayer requests an administrative fine not exceeding $20,000 for each violation or the gross amount if any economic benefit Respondent has derived from violating Sections 4003.001 or 4004.051 of Securities Act or engaging in fraud related to the sale or purchase of securities in Texas.

This prayer does not include any additional funds exceeding $250,000 for illegal or fraudulent acts or practices against Texans over 65 years old.

The Enforcement Division prioritises refunds for investors over an administrative fine assessment. The Enforcement Division will pray that the Honorable Administrative Law Judgment prioritizes the payment of investors and subordinates any assessment of administrative fines until or unless Texans receive a refund of principal deposited into Earn Accounts.

The post A Texan regulator files a notice of hearing against Celsius CEO first appeared on Raw News.