The former CEO of the now-defunct cryptocurrency lender Celsius, Alex Mashinsky, is accused of defrauding investors in a case brought up by the attorney general of New York.
According to the complaint filed today,
“The collapse of Celsius left many individuals in a state of desperation and financial ruin,”
“Celsius’s business model was unsustainable. As Celsius proved unable to generate sufficient returns through safe loans and investments, it began to make uncollateralized loans to institutional borrowers and engage in risky strategies on unregulated decentralized finance protocols.”
“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 Letitia James in a statement.
In the civil suit, James and her staff claim that Mashinsky misled investors by claiming that Celsius had $11 billion under management while failing to disclose that the company also had $11.9 billion in liabilities.
The civil lawsuit would prevent Mashinsky from running any firm in the state of New York and compel him to pay damages and return investor funds.
A judge ruled on Wednesday that digital assets stored in Celsius accounts by customers were considered the company’s property due to the terms of service. Celsius is also embroiled in a lengthy bankruptcy process in federal bankruptcy court.
While promoting its cryptocurrency deposits as being similar to bank accounts, Celsius gave its users substantial interest rates on their holdings. However, such accounts lacked insurance, and the company went down during the stablecoin fall last year. Users are currently rushing to release funds embroiled in legal actions.
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