Celsius Founder Mashinsky Face Fraud Allegations

 Alex Mashinsky, ex-CEO of failed crypto lender Celsius Network is facing a fresh lawsuit from New York Attorney General Letitia James. The lawsuit also seeks to ban Mashinsky from making any business operations in New York. 

Lawsuit Calls Mashinky a Fraud

The suit accuses Mashinsky of committing fraud by being untruthful about Celsius’ financial health between 2018 and June 2022. He allegedly defrauded hundreds of thousands of Celsius users, falsely assuring them of the platform’s stability. This was apparently a ploy to keep funds rolling into the company.

Celsius reportedly lost hundreds of millions of dollars through unsafe investments. However, the company was able to rake in billions in crypto thanks to Mashinsky’s misleading statements, says the suit. 

Per the release, the Israeli-American’s false representation of Celsius’s crumbling state affected over 26,000 New York residents.  A few cases came up in the suit such as one New Yorker who mortgaged two properties and invested the funds with Celsius. This, of course, ended in losses for the client. 

Another case involves a disabled veteran whose $36k investment, which he had saved for nearly 10 years, went up in flames. 

Mashinsky’s Misrepresentation of Celsius’ Finances

Some of Mashinsky’s contentious statements involve the number of Celsius’ investors. Also, it seems he made questionable claims about the platform’s marketing strategies and investments. According to the suit, the former CEO pushed the narrative that Celsius had made secure, low-risk investments with credible entities.

The Attorney General reports that Celsius repeatedly exposed user funds to unsafe counterparties. These risky investments ended in losses which Mashinsky supposedly kept hidden over months.  His alleged offenses also include his failure to register as a salesperson for the lender and a securities and commodities dealer.

In addition, he reportedly promoted Celsius over banks despite a lack of regulatory structure on par with traditional US banks. 

Neither Celsius nor its customers had any hope of receiving the same protections as banks,” the suit stated.

New York Attorney General Seeks a Ban Alongside Restitution

Attorney General Letitia James is set to secure a ban against Mashinsky. The restriction will permanently bar him from conducting business within the pertinent jurisdiction. James also intends to see the ex-CEO pay damages, restitution, and disgorgement. 

Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses. My office will stay vigilant and ensure that bad actors trying to take advantage of New York investors are held accountable.” 

The Attorney General called for residents who had suffered losses due to misrepresentation to share their woes with the OAG. James also encouraged workers in the crypto space to report cases of misconduct or fraud. One option, the release noted is to file an anonymous complaint, a whistleblower complaint with the office of the Attorney General.

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