Israeli judge lifts gagging order revealing arrest of Celsius network’s CFO
After a three-month media blackout, an Israeli judge has cleared news agencies to report the arrest of a former senior executive at Celsius Network, a $19 billion cryptocurrency lending platform.
When Yaron Shalem was arrested on November 18 for alleged cryptocurrency fraud, he was CFO of Celsius, which pays high interest rates on deposits of Bitcoin and other digital coins.
That day, an Israeli trial court heard how Shalem was arrested shortly after landing at Ben Gurion Airport, near Jerusalem, by Israel’s Lahav 433 special investigation unit, the FBI’s equivalent in the country.
At the time of its chief financial officer’s arrest, Celsius had just raised $400 million in equity from investors, including Canada’s second-largest pension fund.
Alex Mashinsky, chief executive of Celsius, said Nov. 24 that the company was increasing its funding round to $750 million in light of investor demand. “We are happy to include more investors who will make Celsius stronger,” he said. Recount the Blockworks website.
Celsius said in a Nov. 26 statement that he had “recently become aware of a police investigation in Israel involving an employee” whom he immediately suspended. The company said the investigation was unrelated to Celsius itself. He has not been charged with any wrongdoing related to Shalem’s arrest.
“We also verified that no assets were misplaced or mishandled,” Celsius added. The statement did not name the employee.
Shalem joined Celsius in March 2021, according to his LinkedIn profile, and is well known in the Israeli tech startup scene as an executive and investor. He was one of 10 arrested, including the owner of Israel’s most famous soccer team, Beitar Jerusalem. None of the suspects have been charged with any offence.
Israeli police said Nov. 18 that suspects were arrested on “suspicion of committing fraudulent cryptocurrency crimes amounting to hundreds of millions of shekels,” or at least tens of million US dollars.
The statement does not specify which companies the allegations relate to.
Initially, only Beitar Jerusalem owner Moshe Hogeg was identified in the press as one of those arrested. The identities of the others were subject to a gagging order that was lifted on Tuesday following a joint request by the Financial Times and The Times of Israel. Before the court order was lifted, Shalem’s arrest was reported by Coindeskdespite the order.
Hearings to have gag orders lifted have been repeatedly delayed as lawyers tested positive for coronavirus and judges struggled to find time slots for legal representation for all defendants as courts Israelis were working through a backlog of pandemic-related cases.
A senior police officer dragged thousands of confidential documents back and forth for regularly canceled or postponed hearings.
Hogeg’s lawyers reportedly said he “vehemently denies the allegations against him and is cooperating fully with his investigators.”
Shalem’s lawyers said he “acted in accordance with the law and strongly and categorically rejects any attempt to associate him with any act of fraud”.
They said Shalem left Hogeg’s venture capital firm in early 2018 and that the suspect companies “were active after he no longer held a position within the group, and without him being involved in it. Our client is certain that at the end of the investigation, it will be found that he has committed no wrongdoing.
Celsius has grown rapidly since its launch in 2017, offering investors returns of up to 17% on cryptocurrency transferred to its platform, which it lends to individuals and institutions. Assets held by Celsius have fallen from $26 billion to $19 billion since November. During the same period, the price of Bitcoin fell by a third.
The $400 million equity investment round in October was led by asset manager WestCap, led by former Airbnb and Blackstone CFO Laurence Tosi, and Caisse de depot et placement du Quebec (CDPQ), the second largest pension fund in Canada.
At the time, Tosi told the FT he had done extensive due diligence on Celsius before deciding to invest. “We have now spent almost nine months with Alex [Mashinsky] and his team, and it’s quite collaborative. This is the work you expect from us with outside advisers, lawyers, etc. “, did he declare.
Alexandre Synnett, technical director of the CDPQ, declared: “We are very cautious. . . our due diligence process is very serious.
The investment follows a September crackdown on digital asset lenders by US state regulators, who said Celsius was engaged in unregistered securities offerings. Celsius denied the allegations.
Last week, Rod Bolger, the former chief financial officer of Canadian bank RBC, was appointed by Celsius to replace Shalem. Celsius said it “will continue to act in the best interest of our community, our customers and our investors.”
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