AG’s Sue Former Celsius CEO for Misleading Investors

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Alex Mashinsky, the Celsius co-founder and former CEO, who is suspicious paid off $17 million in crypto before clients’ crypto withdrawals stopped and before those of the company eventual bankruptcyhas found itself on the receiving end of a scathing civil lawsuit accusing him of defrauding hundreds of thousands of investors out of billions of dollars by misrepresenting the security of the shaky platform.

The lawsuit, filed Thursday by New York Attorney General Letitia James, alleges Mashinsky was involved in a year-long scheme to defraud customers between 2018 and June 2022. During that time, Mashinsky allegedly used false and misleading statements to convince investors that Celsius was a safe alternative to banks, while downplaying the fact that his company was burning millions of investor funds by engaging in risky investment strategies.

Posing as a modern Robin Hood lending platform, Celsius lured crypto enthusiasts by promising them unprecedented returns on digital assets of up to 17%. Eyed investors eager to realize those returns have poured over $20 billion in digital assets into the company. However, behind all the fuss, Celsius was reportedly struggling to generate enough revenue to pay its customers those incredibly high returns. This lack of money allegedly prompted Celsius to make venture investments, including investing hundreds of millions of dollars in unregulated decentralized finance. The company would lose millions from these investments. Mashinsky, it is said, failed to disclose those losses to investors and concealed Celsius’ bleeding financial situation.

“Alex Mashinsky has promised to lead investors to financial freedom, but has led them down a path to financial ruin,” said James in a expression. “The law is clear that it is illegal to make false and unsubstantiated promises and to deceive investors. Today we are taking action on behalf of thousands of New Yorkers who were scammed by Mr. Mashinsky to recover their losses.”

The lawsuit alleges that Mashinsky personally made false or misleading statements about Celsius’s overall security, total number of users and investment strategies. Mashinsky, without any evidence, tried to convince users that its crypto lending platform was safer than heavily regulated baking institutions. In reality, says James, “Neither Celsius nor its customers had any hope of receiving the same protections as banks.” To serve as a director or officer of a company doing business in New York. Mashinsky could also be forced to pay damages for violating New York state’s Martin Act, a law designed to combat securities and commodity fraud.

Celsius was suddenly one of numerous crypto companies prevented Stopping investors from withdrawing funds amid a turbulent crypto meltdown that saw value of its Celsius crypto token will become virtually worthless. Though the company assured customers the breaks were temporary, Celsius went ahead explain Chapter 11 bankruptcy just a month later. Worse, Mashinsky and former Chief Strategy Officer Daniel Leon allegedly withdrew the entire $17 million in cryptocurrency assets in the months leading up to the company’s eventual demise.

New York isn’t the only state interested in the Celcius meltdown. In all, at least 40 separate states have all started platform’s own investigations into allegations of fraud. AG’s Sue Former Celsius CEO for Misleading Investors

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