Crypto lender Celsius Network is still facing the consequences of its tumultuous 2022 long after it declared bankruptcy. New York State Attorney General Letitia James has sued former Celsius CEO Alex Mashinsky for allegedly defrauding investors out of "billions of dollars" in cryptocurrency. The executive purportedly misled customers about Celsius' worsening financial health, and didn't register either as a salesperson or as a commodities and securities dealer.
The Attorney General's office claims Mashinsky falsely boasted of low-risk investments and reliable lending partners while "routinely" exposing investors to high-risk approaches that resulted in losses the company chief hid from customers. He also made untrue statements about safety, strategies and user numbers, according to the lawsuit. Celsius' ex-chief supposedly deceived hundreds of thousands of investors (over 26,000 in the state), some of which James says suffered "financial ruin."
New York hopes to ban Mashinsky from doing business in the state. It also wants him to pay damages and otherwise compensate investors. In a statement to Engadget, Celsius would only reiterate that Mashinsky resigned as CEO in September and is "no longer involved" in managing the firm.
Celsius is one of the more prominent casualties of last year's crypto crash. Its token's value plunged from $7 in 2021 to just $3 last spring. That was particularly damaging to a company that offered loans with little collateral and promised yields as high as 18.6 percent — it didn't have the resources needed to endure the crisis. It tried freezing withdrawals last June to stabilize its assets, but opted for bankruptcy the following month to restructure and otherwise give it a better chance to regroup.
The lawsuit isn't likely to be the end of the fallout. Several states are investigating Celsius' practices, and the Securities and Exchange Commission has been in touch. Celsius isn't alone in dealing with legal repercussions. Just this week, the crypto exchange Coinbase reached a $100 million settlement with New York over alleged financial rule violations. However, it's notable that the state is going after Mashinsky directly, not just the business he once ran.
A U.S. bankruptcy judge ruled on Wednesday that Celsius Network owns most of the cryptocurrency that customers deposited into its online platform, meaning most Celsius customers will be last in line for repayment in the crypto lender's bankruptcy. The ruling by U.S. Bankruptcy Judge Martin Glenn in New York affects approximately 600,000 accounts that held assets valued at $4.2 billion when Celsius filed for bankruptcy in July. The company does not have enough funds to fully repay those deposits, Glenn wrote.
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The suit claims Mashinsky defrauded investors out of billions by lying about Celsius’ “deteriorating financial condition.”
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The New York attorney general’s office on Thursday filed suit against the ex-CEO of cryptocurrency lending platform Celsius Networks for defrauding hundreds of thousands of investors — including 26,000 New Yorkers — out of billions of dollars. Attorney General Letitia James’ case against Alex Mashinsky, filed in State Supreme Court in Manhattan, accuses him of financially ruining vulnerable …
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New York's attorney general on Thursday sued Celsius Network founder Alex Mashinsky, claiming he defrauded investors out of billions of dollars in digital currency by concealing the failing health of his now-bankrupt cryptocurrency lending platform. Mashinsky persisted in promoting Celsius as a safe alternative to banks, paying interest as high as 17% on deposits, while concealing hundreds of millions of dollars of losses in risky investments, according to a complaint filed by the attorney general, Letitia James. The civil lawsuit seeks to ban Mashinsky from doing business in New York and have him pay damages for violating laws including the state's Martin Act, which gives James broad power to pursue securities fraud cases.
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Alex Mashinsky, a co-founder of bankrupt crypto lender Celsius Network who prosecutors allege bilked investors out of billions, is a serial entrepreneur who has portrayed himself as a modern-day Robin Hood. Mashinsky, 57, fraudulently promoted Celsius as a safe alternative to banks, while concealing that it was losing hundreds of millions of dollars in risky investments, according to a lawsuit filed on Thursday by New York Attorney General Letitia James. The civil lawsuit seeks to ban Mashinsky from doing business in New York and have him pay damages, restitution and disgorgement.
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New York Attorney General Letitia James has filed a lawsuit against former Celsius CEO Alex Mashinsky for allegedly defrauding his crypto investors.
New York Attorney General Letitia James filed a lawsuit against Alex Mashinsky, co-founder and former CEO of Celsius Network, according to an announcement on 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 safety to encourage investors to deposit billions of dollars in digital assets onto the platform.”
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