Celsius Network Co-founder and former CEO Alex Mashinsky is being sued by the New York Attorney General.
The suit alleges that Mashinsky made false and misleading statements about cryptocurrency lending platform Celsius’ safety, misrepresented and concealed Celsius’ deteriorating financial condition and failed to register as a salesperson for Celsius and as a securities and commodities dealers, the New York attorney general said in a Thursday (Jan. 5) press release.
Hundreds of thousands of investors — including 26,000 New Yorkers — were defrauded out of billions of dollars’ worth of cryptocurrency, the release said.
“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” New York Attorney General Letitia James said in the release. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal.”
Celsius Network did not immediately reply to PYMNTS’ request for comment.
The Wall Street Journal reported Thursday that Mashinsky’s lawyer, Benjamin Allee, said Mashinsky denies the allegations and looks forward to defending himself in court.
Celsius Network filed for Chapter 11 bankruptcy July 13, a month after it had frozen customer accounts.
As PYMNTS reported at the time, the company had become a big name in crypto lending by offering high returns while suggesting it was less risky than a regular bank. But the company got into trouble by offering big yields to crypto depositors while making big loans that were backed by insufficient collateral, which left it vulnerable to a market downturn.
The New York attorney general’s press release said that while serving as the public face of Celsius, Mashinsky made false statements to recruit investors and concealed the firm’s losses from investors.
The lawsuit aims to ban Mashinsky from engaging in business relating to securities and commodities in New York and from serving as a director of officer of any company doing business in the state and require him to pay damages, restitution and disgorgement, according to the press release.
“Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses,” James said in the release.
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