Crypto lending firm Celsius Network and its former CEO, Alex Mashinsky, are grappling with legal troubles as they confront lawsuits filed by three prominent American entities. The U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC) have all taken legal action against the now-bankrupt company and its former leader.

In a startling development, Bloomberg reported that Alex Mashinsky, the co-founder and ex-CEO of Celsius, was arrested and charged with fraud. These charges, brought forth by the U.S. District Court for the Southern District of New York, are part of an alleged "scheme to defraud customers of Celsius Network," as outlined in a sealed indictment.

The SEC filing further exposes Celsius and Mashinsky's questionable practices, stating that the company raised billions of dollars through fraudulent offers and sales of crypto asset securities. Investors were deceived with false promises of a secure investment with high returns, particularly through the Earn Interest Program, which claimed potential annual yields of up to 18%.

Additionally, the SEC asserts that Celsius' native token, CEL, and its former Earn Interest Program qualify as securities, aligning with the agency's stance on various cryptocurrencies such as BNB, BUSD, SOL, ADA, and MATIC.

Celsius' financial instability became evident when it filed for bankruptcy in June 2022. Prior to the bankruptcy, a Celsius executive admitted in an internal message that the company lacked profitable services. The New Jersey-based startup, once valued at $3.25 billion, disclosed assets and liabilities ranging from $1 billion to $10 billion and over 100,000 creditors in its Chapter 11 bankruptcy filing.

In a bid to salvage the situation, a consortium named Fahrenheit, spearheaded by investment firm Arrington Capital, emerged to acquire Celsius' assets. The consortium, comprising Arrington Capital, US Bitcoin Corp., Proof Group, Steven Kokinos, and Ravi Kaza, plans to distribute Celsius' liquid assets to account holders. Illiquid assets, including the institutional loan portfolio, mining business, and alternative investments, will be managed by a new team.

The legal onslaught faced by Celsius Network and its former CEO highlights the increasing scrutiny of the crypto industry by regulatory authorities. As investors seek protection and accountability, cases like these shed light on the importance of transparent and compliant practices within the sector.