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New York Attorney General files lawsuit against Celsius' Alex Mashinsky for defrauding investors

source-logo  cryptoslate.com 05 January 2023 15:16, UTC

The Attorney General of New York, Letitia James, has filed a lawsuit against Alex Mashinsky, the former CEO and co-founder of Celsius Network LLC, for misleading Celsius’ investors about billions of dollars of cryptocurrency.

The lawsuit demands Mashinsky pay damages, restitution, and disgorgement and ban him from doing business in the state of New York, citing multiple violations.

The lawsuit alleges Mashinsky misled investors about Celsius’s safety to lure them into depositing billions of dollars. It also charged Mashinsky with misrepresenting and concealing Celsius’s deteriorating financial condition when Celsius lost assets worth millions of dollars. Additionally, Mashinsky didn’t register as a Celsius salesperson or a securities and commodities dealer.

In her lawsuit, Letitia James also claimed that Mashinsky made false and deceptive statements about Celsius’s safety, its number of users, and its investment strategies to attract investors. During his appearances at cryptocurrency conferences and social media to promote Celsius, he claimed Celsius was safer than a bank. As reported, many investors lost funds as a result.

It is not the first time the Attorney General has taken action against crypto firms. As part of her lawsuit, she accused Nexo Inc. and Nexo Capital Inc. of operating illegally and defrauding investors in September 2022. The Attorney General also reached a settlement with crypto platform BlockFi Lending LLC for offering unregistered securities in June last year.

Due to the market downturn following the Terra debacle, Celsius Network filed for chapter 11 bankruptcy in July 2022. The firm has been fighting a court battle with customers of its Earn platform since last month over who owns the funds deposited in Earn accounts. On January 5, the US Bankruptcy court ruled that the $4.2 billion deposited to Earn Accounts belonged to Celsius.