Two Celsius Network co-founders agreed to pay a total of $6.5 million to settle Federal Trade Commission fraud allegations related to the 2022 collapse of the crypto lending platform, adding to a prior $10 million settlement by former CEO Alex Mashinsky. This brings combined payments from the trio to $16.5 million, highlighting growing regulatory enforcement against misleading claims in crypto.

Shlomi Daniel Leon, Celsius’ former chief strategy officer, will pay $4.1 million under a court order from U.S. District Judge Denise Cote issued on June 29. In addition, a $4.72 billion judgment against Leon is mostly suspended contingent on his compliance with settlement terms. Similarly, Hanoch “Nuke” Goldstein, the former chief technology officer, agreed to a $2.4 million payment with the same conditional suspended judgment.

The FTC accused Celsius of falsely advertising customer deposits as safe and insured, when in reality the platform had no such coverage and engaged in $1.2 billion of unsecured loans by April 2022. Customers were misled to believe they could withdraw funds anytime and that a $750 million insurance policy protected deposits, claims the FTC found to be untrue. Reassurances continued even as Celsius approached bankruptcy, culminating in suspended withdrawals in June 2022 and a bankruptcy filing the next month. At its height, Celsius managed roughly $25 billion in assets but left customers unable to access approximately $4.7 billion.

Implications for Crypto Market Trust and Regulation

These settlements shows the increasing scrutiny U.S. regulators apply to crypto firms making bold claims about asset security without adequate backing. The permanent bans imposed on Leon and Goldstein prohibit them from marketing or selling crypto-related products, signaling a shift towards holding executives personally accountable. Mashinsky’s April settlement included a similar ban and a $10 million payment, showing a coordinated regulatory effort.

For investors and market participants, these developments stress the risks of reliance on platforms lacking transparent asset management and real insurance coverage. The FTC’s actions reinforce that deceptive marketing in crypto carries tangible legal and financial consequences. This case may prompt heightened due diligence among users and possibly tighter regulatory frameworks aimed at protecting consumers in decentralized finance environments.

This material is informational and not financial advice