New York Attorney General Letitia James has filed a lawsuit against the beleaguered founder and former CEO of Celsius Network, Alex Mashinsky. Celsius is in the midst of bankruptcy proceedings. Once a high-profile crypto executive, Mashinsky exited the firm this past September.
According to the AG, Mashinsky defrauded thousands of investors, including over 26,000 New Yorkers. This entailed “billions of dollars worth of cryptocurrency.”
The lawsuit alleges that Mashinsky repeatedly made false and misleading statements about Celsius while encouraging investors to deposit funds onto the platform. As the firm struggled, the AG alleges that Mashinsky misrepresented and concealed Celsius’s deteriorating financial condition. The lawsuit claims that Celsius described itself as safer than a bank.
Additionally, the AG claims that Mashinsky failed to register as a salesperson for Celsius and as a securities and commodities dealer.
The lawsuit seeks to ban Mashinsky from doing business in New York and require him to pay damages, restitution, and disgorgement.
James said that as the former CEO, Mashinsky promised financial freedom but delivered 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. My office will stay vigilant and ensure that bad actors trying to take advantage of New York investors are held accountable.”
The AG pointed to several examples of investor losses, including an example of one New York resident who mortgaged two properties to invest with Celsius.
The bankruptcy proceedings recently announced a court ruling that funds deposited with Celsius for its Earn program were effectively assets of Celsius and not the investor.