Israeli authorities have arrested Celsius (CEL) chief financial officer Yaron Shalem in a sting involving crypto mogul Moshe Hogeg and at least seven Hogeg associates.
Celsius Network has scrubbed mentions of Shalem from its website. Shalem was listed as the project’s CFO as recently as November 24 on archive.org and other web archival services.
Hogeg is facing charges of fraud, money laundering, and sexual assault. Full details regarding charges against Hogeg associates, including Shalem, are not yet available.
Israeli news outlet Haaretz notes Hogeg’s various assets, including Israeli soccer team FC Jerusalem.
Celsius Network chief Alex Mashinsky previously would not confirm knowledge of Shalem’s arrest. When Celsius acknowledged the matter, it said a team member was under “police investigation” and funds held by the company were safe.
According to a police report, Israeli police were investigating a total of 18 people involved in an alleged fraud and money laundering scheme.
Celsius CFO knows crypto mogul Hogeg well
Mashinsky denies that Hogeg has anything to do with Celsius Network. However, Shalem did work for Hogeg for years, including as CFO for Hogeg’s venture capital company, SingulariTeam.
Mashinsky also served as an advisor for ventures like Hogeg’s Sirin Labs (SRN), which remodelled Hogeg’s failed $16,000 luxury smartphone into a “blockchain phone” with its own cold wallet in 2019.
Hogeg also served as an advisor to Mashinsky’s Celsius Network, archives show.
Celsius Network offers crypto loans and promises annualized yield of up to 17% on deposited crypto assets. It recently closed a $750 million funding round.
Mashinsky admitted to transacting over $1 billion worth of commercial paper loans with Tether (USDT) during a Bloomberg investigation.
Read more: [Tether Papers: This is exactly who acquired 70% of all USDT ever issued]
Not long after that report, Celsius received an additional $1 billion in fresh USDT. Mashinsky also has access to a Bitfinex trading account.
Tether has attracted the attention of the New York Attorney General, CFTC, SEC, Federal Reserve, and even US Treasury Secretary Janet Yellen, who personally expressed concern about Tether’s lack of transparency regarding its backing.
Yellen also dislikes stablecoins’ potential to challenge the dominance of fiat currencies like the US dollar.
Celsius heavily leverages Tether
According to due diligence unit Jakal, Celsius Network’s net assets were worth $1.44 billion in December 2020 with liabilities totaling over $2.9 billion.
Worse, $1.5 billion of its Gross Assets were unsold CEL tokens, which obviously would not preserve their value amid a $1.5 billion liquidation. This implies its USDT loans, at least at one point, made up a sizable portion of Celsius’ operational capital.
Some users have reported difficulty withdrawing funds from Celsius. Others are concerned that Celsius may be a Tether-supported Ponzi scheme.
Celsius has underperformed against top crypto Bitcoin and Ether, but still eclipsed Hogeg’s SRN.
Read more: [Celsius chief claims he ‘redistributes wealth’ in face of regulatory pressure]
Regulators in Texas and New Jersey have also scrutinized Celsius Network’s offerings on the suspicion that the company offers unregistered securities.
Celsius Network maintains a headquarters in Hoboken, New Jersey. It also reports financials in the United Kingdom.
A court has scheduled a hearing in the Texas case against Celsius Network for February 14, 2022. Texas regulators are seeking a cease-and-desist order.
New Jersey regulators also filed a cease-and-desist order requiring that Celsius Network stop offering interest-bearing investments in the state.
Celsius Network issued a statement in response to the arrest of its CFO to assure holders Shalem’s legal troubles have nothing to do with the company.
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