Alex Mashinsky, the former CEO of Celsius Network, a defunct cryptocurrency lending, and borrowing platform has been sued by the New York Attorney General (NYAG), Letitia James. Mashinsky was sued over an allegation of defrauding Celsius’ investors.
The press release from the office of the Attorney General states that Mashinsky used Celsius to swindle thousands of clients including 26,000 New York residents, out of crypto valued at billions of dollars.
In her complaint, James seeks to bar Mashinsky from operating in New York and to compel him to make restitution, disgorgement, and compensatory payments.
The filed lawsuit claims that Mashinsky made untrue and misleading statements about Celsius’s safety on multiple occasions in order to entice investors to deposit billions of dollars in digital assets on the platform.
The lawsuit also alleged that Mashinsky hid the dwindling financial status of Celsius from its investors in addition to his neglect to register as a dealer as well as a salesman for the company.
Based on the above allegations, James commented that making false promises to investors is illegal under the law, therefore her office is taking action to ensure that New Yorkers recover their lost assets invested in Celsius due to Mashinsky’s deceptive measures.
Celsius Network in the Wake of Insolvency
Celsius declared bankruptcy in mid-July 2022. The company stated at the time that it had assets and liabilities totaling between $1 billion and $10 billion, with over 100,000 creditors.
The crypto lending firm filed for bankruptcy protection after a month of struggling financially. Celsius first showed signs of insecurity when it announced in April that its U.S. arm would begin holding non-accreditors’ tokens in custody. As a result, investors were unable to add new assets, and earning rewards on Celsius’ Earn platform was suspended.
In the wake of its liquidity issues, Celsius was ordered by a United States bankruptcy judge to return crypto valued at $50 million to its custody users. The ruling, however, only applies to customers who have non-interest-bearing accounts.
In December 2022, Celsius was granted permission to extend its exclusivity period for filing a Chapter 11 plan of reorganization until February 15, 2023.
Celsius added that the company intends to use the extension period wisely by developing a private business strategy and investigating all profitable opportunities available to the company for the benefit of its customers and other stakeholders.
