New York Attorney General Letitia James is pursuing legal proceedings against Celsius founder and CEO Alex Mashinsky, claiming that his alleged “false and misleading statements” resulted in billions of dollars in losses for investors.
On January 5th, the New York Attorney General’s office announced a lawsuit against Alex Mashinsky, the CEO of Celsius, alleging that he defrauded investors, including over 26,000 New York residents, out of billions of dollars worth of cryptocurrency.
Costing Investors Losses
Letitia James, the New York Attorney General, claims that Mashinsky’s actions leading up to Celsius’s bankruptcy contributed to investor losses by misrepresenting the platform’s financial condition and failing to follow certain regulatory requirements.
Letitia James stated: “As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin. The law is clear that making false and unsubstantiated promises and misleading investors is illegal. Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses.”
James also accused Mashinsky of promoting false information through conference appearances, social media posts, and interviews, and stated that Celsius customers did not have the same level of protection as those at traditional financial institutions because the platform was not subject to regulatory requirements.
Blocking Further Business
The lawsuit seeks to prevent Mashinsky from conducting business in New York in the future and requires him to pay damages, restitution, and disgorgement to affected Celsius investors.
Celsius declared Chapter 11 bankruptcy in July 2022, preventing many cryptocurrency users from accessing their assets on the platform and leaving the company with billions of dollars in balance sheet deficits. Mashinsky resigned as CEO in September as reported by Cointelegraph, citing his role as an “increasing distraction” due to the company’s users’ difficult financial circumstances.
Celsius Network was founded in 2017 and quickly rose to prominence in the cryptocurrency lending market, with over 1.7 million customers, $25 billion in assets under management, and over $850 million in cumulative interest paid out by this year. However, the company ran into financial difficulties as the cryptocurrency market’s prolonged bear market exposed risky and leveraged trading practices.
Mashinsky allegedly restructured Celsius to focus on cryptocurrency custody in an attempt to save the company and allegedly proposed converting the company’s debt into cryptocurrency and distributing it to creditors via an airdrop. Things did not work out and after reportedly trying to flee the US, he is now facing a legal storm.
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