Who is Alex Mashinsky, the man behind the alleged Celsius crypto fraud?

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Jan 5 (Reuters) – Alex Mashinsky, co-founder of bankrupt crypto lender Celsius Network, which prosecutors say defrauded investors billions, is a serial entrepreneur who has posed as a Robin Hood of the modern times.

Mashinsky, 57, fraudulently promoted Celsius as a safe alternative to banks, while hiding that he was losing hundreds of millions of dollars in risky investments, according to a lawsuit filed Thursday by New York Attorney General Letitia James.

The civil lawsuit seeks to bar Mashinsky from doing business in New York and to make him pay damages, restitution and reimbursement.

James’ lawsuit is the latest black eye for the crypto industry, which has been rocked by accusations against the founder of crypto exchange FTX, Sam Bankman-Fried. The former tycoon, who has been accused of deceiving investors and causing billions of dollars in losses, pleaded not guilty on Tuesday.

Mashinsky, a Ukrainian native whose family emigrated to Israel, decided to move to New York after taking a trip to the city in 1988, he told a Forbes podcast.

“I looked around and said to myself, I’m never going back,” he said.

Since then, he has founded eight companies, including Arbinet, which went public in 2004, and Transit Wireless, which provides Wi-Fi to the New York City subway.

Mashinsky claims to have created Voice over Internet Protocol (VoIP), a precursor to ride-sharing app Uber, as well as a cryptocurrency idea that predated bitcoin.

Mashinsky got involved in crypto in 2017, when his venture capital fund, Governance Dynamics, brought in blockchain firm MicroMoney as a strategic partner. He founded Celsius the same year.

As a teenager, Mashinsky bought confiscated goods like hair dryers and VCRs at customs auctions at Israel’s Ben-Gurion Airport and resold them for a profit, according to a 1999 article in the now defunct tech publication Industry. Standard.

Mashinsky at the time aspired to start a full body transplant business: “Give an old person a new body – keep the head, keep the spine and recreate the rest,” he said.

The executive served in the IDF from 1984 to 1987, where he trained as a pilot and served in Golani infantry units, according to his personal website.

Mashinsky has raised more than $1.5 billion for various ventures that raised more than $3 billion when he and other investors cashed in, according to his website, which also says he holds more than 50 patents. .

“The biggest risk is not taking it,” reads the homepage.

In hundreds of interviews, blog posts and live streams as the public face of Celsius, Mashinsky has promised his clients that they will receive high returns if they deposit digital assets on his platform, with minimal risk, according to the New York AG lawsuit.

Neither Mashinsky nor his attorney immediately responded to requests for comment on Thursday.

Celsius promised investors would earn returns of up to 17%, among the highest in the industry. “We take it from the rich,” the lawsuit said, citing Mashinsky.

By early 2022, it had amassed $20 billion in digital assets from investors. But the company has struggled to generate enough revenue to pay the promised returns and has embarked on much riskier investments, according to the claim.

The company issued hundreds of millions of dollars in unsecured loans and invested hundreds of millions more in unregulated decentralized financial platforms, according to the lawsuit.

Mashinsky, who wore T-shirts with slogans such as “banks are not your friends,” continued to misrepresent to investors that Celsius was generating high returns through low-risk investments, according to the legal filing.

In a June 10 “Ask Mashinsky Anything” YouTube video, the entrepreneur said “Celsius has billions in cash.” Two days later, it suspended investor withdrawals “to stabilize liquidity and operations.”

Celsius filed for Chapter 11 protection from creditors on July 13, posting a $1.19 billion deficit on its balance sheet.

Reporting by John McCrank in New York and Hannah Lang in Washington Editing by Lananh Nguyen and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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