New York Attorney General Sues Former Celsius CEO for Defrauding Crypto Investors

[ad_1]

New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, co-founder and former CEO of Celsius Network, according to an announcement Thursday.

James alleged that Mashinsky defrauded hundreds of thousands of investors out of billions of dollars worth of cryptocurrency. The lawsuit also claims that Mashinsky repeatedly made false and misleading statements about Celsius’s security to encourage investors to deposit billions of dollars in digital assets on the platform.

Celsius, which was once one of the largest crypto lenders in the world, filed for bankruptcy in mid-July 2022. At the time, Celsius said it had between 1 billion and 10 billion dollars of assets and liabilities and over 100,000 creditors.

Before filing for bankruptcy, Celsius froze withdrawals for customers in June citing extreme market conditions. This freeze has never been lifted.

Celsius lost hundreds of millions of dollars in assets through risky investments and Mashinsky misrepresented and concealed Celsius’ financial situation, the AG office said. Additionally, Mashinsky did not register as a seller for the platform and as a securities and commodities trader, he added.

The law clearly states that it is illegal to make false and unsubstantiated promises and to mislead investors, James said in the statement.

The NYAG lawsuit seeks to bar Mashinsky, a New York resident, from doing business in the state and compel him to pay damages, restitution and reimbursement, in an undisclosed amount.

This lawsuit follows a number of lawsuits filed by James. Last year, the attorney general sued Nexo for operating illegally and defrauding investors and reached a $1 million settlement with now-bankrupt BlockFi for offering unregistered securities, among other things.

The announcement follows a federal bankruptcy judge’s ruling on Wednesday that cryptocurrencies deposited in interest-bearing accounts at Celsius Network actually belong to the company thanks to the fine print.

The verdict gives Celsius ownership of the $4.2 billion worth of cryptocurrency users deposited into its high-interest Earn program, according to a 45-page filing in New York’s U.S. Bankruptcy Court Southern District on Wednesday.

Celsius had about 600,000 accounts in its Earn program, and the accounts had a collective value of about $4.2 billion as of July 10, 2022, the filing said. About $23 million of that was made up of stablecoins.

[ad_2]