​New York Attorney General accuses ex-Celsius CEO of defrauding investors of “billions of dollars”

What’s new? On January 5, New York State Attorney General Letitia James filed a lawsuit against Alex Mashinsky, co-founder and former CEO of the bankrupt crypto lending platform Celsius Network and related companies, for defrauding “hundreds of thousands of investors” of billions of dollars. The depositors include more than 26 000 New Yorkers. The lawsuit alleges that Mashinsky repeatedly made false and misleading statements about the safety of Celsius to induce investors to deposit digital assets onto the platform.

Link to the lawsuit

What else does the lawsuit say? Because Celsius lost hundreds of millions of dollars in assets in risky investments, Mashinsky misrepresented and concealed the platform’s deteriorating financial condition. He also failed to register as a seller and dealer of securities and commodities. The lawsuit demands that Mashinsky be barred from doing business in New York and that he be ordered to pay damages, restitution, and disgorgement.

“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 Attorney General James. She said the state attorney’s office has taken action on behalf of the thousands of New Yorkers who were defrauded by Mashinsky to recoup their losses. James assured that her office would make sure that unscrupulous players trying to take advantage of New York investors were brought to justice.

In December, bankruptcy judge Martin Glenn ordered Celsius to return $44 million to custodial account holders. Meanwhile, earlier in July, Celsius claimed ownership of most of the customer funds under the platform’s terms of use.

The media later reported that Alex Mashinsky withdrew $10 million from the platform weeks before it froze customer funds, citing tough market conditions, and subsequently declaring bankruptcy.

In July, KeyFi accused Celsius of running a Ponzi scheme as well as failing to pay interest on its profits as part of a partnership. Later, a group of investors also accused the platform of employing a Ponzi scheme. As a result, the court ordered a creditor committee to work with an outside expert to investigate the company’s activities for fraud.

For what led Celsius to collapse, read this GetBlock Magazine’s exclusive feature.