The co-founder and former CEO of Celsius Network LLC, the failed crypto lending platform, was accused of fraud today by New York’s attorney general.
State attorney general Letitia James filed a lawsuit against former Celsius chief Alex Mashinsky, alleging that hundreds of thousands of investors were effectively defrauded out of billions of dollars worth of crypto on the platform that filed for bankruptcy last July.
“Mashinsky promoted Celsius as a safe alternative to banks while concealing that Celsius was actually engaged in risky investment strategies,” the lawsuit said.
Among other things, the lawsuit alleged 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,” and that he hid the firm’s deteriorating financial condition.
These alleged misrepresentations amounted to fraud under New York’s Martin Act, the suit alleged. It also alleged that Mashinsky failed to register as a securities and commodities dealer.
“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” James said in a release.
The allegations have not been proven.
The lawsuit seeks to ban Mashinsky from doing securities or commodities business in New York and to require him to pay damages, restitution, and disgorgement.
In October 2021, Caisse de dépôt et placement du Québec invested US$150 million in Celsius. In August 2022, following Celsius’s bankruptcy announcement, the Caisse announced it was writing down its entire investment in the crypto lender.