Celsius CEO Eager to ‘Educate’ Securities Regulators in Brewing Legal Fight

In an AMA Friday, Celsius CEO Alex Mashinsky said the crypto lender was ready to work with regulators.

Sep 17, 2021 at 6:36 p.m. UTC
Updated Sep 17, 2021 at 8:22 p.m. UTC

Celsius CEO Alex Mashinsky brushed aside his crypto lending firm’s brewing standoff with state watchdogs Friday, telling viewers of a live-streamed ask-me-anything (AMA) that he welcomes the chance to educate U.S. securities regulators.

“Any regulator who wants to learn more about what we do: we collaborate, cooperate and we don’t see any issues with that – the opposite,” he said in response to Friday’s allegations of securities violations from the Texas State Securities Board (TSSB).

He seemed to imply more state-level actions were inbound: “Celsius also received several requests for information, like from the state of Texas.”

Minutes later, New Jersey regulators ordered Celsius to cease offering new interest-earning crypto accounts by Nov. 1. It alleged that unregistered securities sales had generated $14 billion for Celsius.

The fracas was reminiscent of July’s state-led barrage against BlockFi. Then, five U.S. states alleged in quick succession that Celsius’ buttoned-up competitor was violating local securities laws. Interest-bearing crypto accounts were the target there, too.

Mashinsky, who spoke only of the Texas action Friday, seemed unfazed by the coming torrent. He framed his company’s lending offering, which promises returns far greater than in traditional banking, as equivalent to Robin Hood of yore.

“They should be cheering for us as we’re effectively helping redistribute wealth and provide opportunity for everybody, not just the 1%,” he said after noting that “regulators are here to protect consumers.”

Mashinsky welcomed the chance to effectively educate the regulators who he said might not fully understand Celsius’ product – or what it does. He made the coming fights sound like more of a bump in the road than an existential threat that could shutter billions of dollars in inflows.

But that’s exactly what the fight appears to be: New Jersey is giving Celsius just over a month before a cease-and-desist order kicks in. The action would stifle new account creation and cut off new deposits from existing accounts.

“We are committed to educate and protect investors from companies that attempt to bypass our laws,” New Jersey Bureau of Securities chief Christopher W. Gerold said in a press statement, adding:

“The Bureau’s action is intended to protect the public and put on notice those trying to circumvent regulated activities.”

Texas was more conciliatory Friday. TSSB Enforcement Director Joe Rotunda told CoinDesk he was not out to get Celsius so much as bring it in line with the law.

“I am not trying to put the company out of business or shutter its doors,” Rotunda said via email. “Instead, I recognize digital assets and blockchain technology are paving the way for exciting new opportunities and new financial services. We are simply trying to get Celsius in compliance with the law so it can continue to operate legally and legitimately while protecting its clients and their assets.”

If the AMA was any indication, Celsius is going full steam ahead. Mashinsky hailed Celsius’ growth and dangled a cash incentive to viewers who helped him bring more new clients on board.

“We just shower money on all you guys,” he said, contrasting his $50 referral bonus with the star-struck marketing campaigns of FTX and BlockFi.

“Why?” he said. “I’d rather you have it than Tom Brady.”

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Danny is CoinDesk's deputy business editor. He owns BTC, ETH and SOL.