New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, alleging the Celsius founder and former CEO made numerous “false and misleading statements” which led to investors losing billions.
In a Jan. 5 announcement, the New York Attorney General’s office announced the lawsuit, which allegedly involved defrauding investors — including more than 26,000 residents of the U.S. state — out of billions of dollars worth of crypto. According to James, Mashinsky’s actions leading up to Celsius declaring bankruptcy contributed to investor losses by misrepresenting the platform’s financial condition and failing to abide by certain regulatory requirements.
“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” said James. “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.”
I am suing the former CEO at cryptocurrency platform. @CelsiusNetwork For defrauding investors of billions of Dollars.
Alex Mashinsky misled people about the risks involved in Celsius and hid its worsening financial condition. Also, he failed to register in New York.
— NY AG James (@NewYorkStateAG) January 5, 2023
James claimed that Celsius customers didn’t have the same protections as traditional financial institutions, because Celsius is not subject to regulatory requirements. The lawsuit aimed to ban Mashinsky from “doing business in New York” in the future as well as having him pay damages, restitution and disgorgement to affected Celsius investors.
Related: Judge rules Celsius is the owner of funds in Earn accounts. This opens up the possibility for stablecoins to be sold
Celsius filed for Chapter 11 bankruptcy on July 20, 2022. This left many crypto users with assets on the platform and a gap in their balance sheets in the billions. Mashinsky resigned as CEO in September, saying his role had become an “increasing distraction” amid users facing “difficult financial circumstances”.