New York Attorney General Files Lawsuit Against Alex Mashinsky

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  • New York Attorney General Letitia James has filed a civil lawsuit against former Celsius CEO Alex Mashinsky
  • The suit alleges that Mashinsky breached the Martin Act and a secondary state law
  • Mashinksy perpetually claimed that Celsius was safe when it was in financial difficulty

New York Attorney General Letitia James has filed a civil lawsuit against Alex Mashinsky, the co-founder of failed crypto lender Celsius Network, accusing him of defrauding investors out of billions of dollars in digital currency. Celsius went bankrupt in June last year, despite Mashinsky’s continued denials that the platform was in trouble. The suit claims that these statements were false and covered up the true financial situation surrounding Celsius, with James alleging that Mashinsky “promised to lead investors to financial freedom but led them down a path of financial ruin.”

26,000 New Yorkers Held Celsius Accounts

The attorney general’s office says that more than 26,000 New Yorkers had deposited about $440 million in Celsius as of December 31 last year, equating to some 10% of the $4.2 billion in funds that Celsius has remaining to settle all its obligations. James argues in the suit that Mashinsky violated the state’s Martin Act, which is used to address securities and commodities fraud, and a state law that allows the attorney general to investigate fraud. 

In addition to restitution and damages, James is seeking to bar Mr. Mashinsky from engaging in business relating to the issuance or sale of securities and commodities in New York. She also wants to bar him from serving as an officer of companies operating in the state.

Celsius Not Impacted

Celsius responded to the lawsuit by saying that Mashinsky no longer works at the company, having departed in September, while his lawyer, Benjamin Allee, said Mashinsky “denies these allegations” and that he “looks forward to vigorously defending himself in court.”

The lawsuit doesn’t affect Celsius directly, which got some good news this week when it was awarded some $150 million deposited by customers into its high-interest accounts.