Alex Mashinsky, co-founder and former CEO of Celsius, a cryptocurrency lending platform that went bankrupt, was taken into custody on Thursday following an investigation into the company’s downfall. The U.S. Securities and Exchange Commission (SEC) has accused Celsius Network and Mashinsky of securities fraud. The SEC alleges that Celsius raised billions of dollars from investors through unregistered and fraudulent offers and sales of crypto asset securities. They claim that Celsius falsely promised investors high returns through its “Earn Interest Program” and manipulated the price of its CEL token. The SEC contends that CEL and the Earn Interest Program are securities and that Celsius and Mashinsky failed to register them with the SEC.

The CFTC and the FTC have also also taken legal actions against Celsius and Mashinsky. The CFTC reportedly found that Celsius and its CEO violated regulatory rules by providing misleading information to investors. Celsius Network filed for bankruptcy in July 2022, and its assets were later acquired by the crypto consortium Fahrenheit.

The arrest of Mashinsky and the legal actions against Celsius highlight the increasing regulatory scrutiny facing the cryptocurrency industry. Compliance with regulations will be crucial for the success and longevity of crypto platforms and services. However, critics argue that the SEC’s stringent regulatory approach may be driving crypto innovation out of the United States.