New York Attorney General Letitia James took to Twitter to announce she will file a lawsuit against former Celsius CEO Alex Mashinsky for defrauding investors.
Celsius ex-CEO faces legal action
The New York AG has accused Alex Mashinsky, the former CEO of Celsius Network, of committing fraud against hundreds of thousands of venture capitalists by making deceptive statements about the firm’s status between 2018 and June 2022 in an attempt to keep the cash rolling in.
According to the Attorney General’s office, Mashinsky misled investors with “low-risk investments” and dependable lending associates while frequently subjecting venture capitalists to high-risk strategies that led to losses he concealed from clients.
The attorney claims he also compiled lies about Celsius’ safety, and user numbers. Celsius’ former CEO allegedly duped over 26,000 investors in the state, and James believes some experienced financial ruin.
“Mashinsky tricked hardworking people into investing their life savings into Celsius, promising big financial returns and claiming the platform was safer than a bank. Instead, Celsius collapsed, and New Yorkers were left in financial ruin.”
Letitia James, New York Attorney General.
The state of New York wants to forbid Mashinsky from conducting business within its boundaries. He is also required to make restitution to investors and pay other penalties. Mashinsky stepped down as CEO in September, and he is “no longer associated” with running the company, Celsius said in a recent declaration.
Celsius lacked funds to weather crypto crisis
Celsius was among the most visible victims of last year’s virtual currency crash. Its token value fell from $7 in 2021 to $3 last year. The token price fall was detrimental for a firm that provided loans with minimal collateral and pledged yields as high as 18.6%. Moreover, the startup lacked the funding necessary to weather the crisis.
Celsius attempted to freeze withdrawals last June to stabilize its assets but instead filed bankruptcy later that month to revitalize and otherwise give itself a better chance of recovery.
The lawsuit against Mashinsky is unlikely to be the last word on the situation. Numerous states are looking into Celsius’ activities; the Securities and Exchange Commission has contacted them.
Celsius is not the only one facing legal consequences. Coinbase, a cryptocurrency exchange, recently reached a $100 million payout with New York over allegations of financial non-compliance. Notwithstanding, it’s worth noting that the state is going after Mashinsky immediately rather than just the company he used to run.