New York’s AG Sues ex-Celsius CEO for Defrauding Investors

The attorney general of the state of New York, Letitia James has initiated legal action against Alex Mashinsky, former CEO of the now-bankrupt crypto lender Celsius for misleading and defrauding investors. 

According to the filing, Mashinsky is accused of hiding the financial health of his now-bankrupt platform and promoting the firm as a better alternative to banks.

Additionally, Letitia in a statement said “Alex Mashinsky promised to lead investors to financial freedom but instead led them” to financial ruin as the investors lost billions of dollars worth of digital assets.

The attorney general’s lawsuit, which is filed on behalf of the investors, especially the over 26,000 New Yorkers affected by Celsius’ woes, is seeking to ban Mashinsky, a New York resident from conducting any business intelligence in the state. It is also seeking damages for an undisclosed amount in addition to restitution and disgorgement on behalf of the affected users.

Interestingly, Letitia is suing the former Celsius CEO directly as its bankrupt firm is not a defendant in the lawsuit filed in Manhattan. Before it filed for bankruptcy, Celsius operated a model where it promised investors as high as a 17% interest on deposits.

Alex Mashinsky’s Contribution to Celsius Woes

Alex in a bid to protect the firm personally took charge of trading strategy at the firm. Without accepting input from experts, he ordered the sale of Bitcoins (BTC) worth hundreds of millions of dollars. He made the order without clearly checking Celsius’ information on its holdings.

Unfortunately, Alex’s actions led to the firm woes, although he denied saying he did not trade customers’ assets. Meanwhile, all of his bad choices together with its creditors’ inability to fulfill their loan obligation, culminated in the firm’s filing for bankruptcy last year after he halted withdrawals on its platform.

Shortly after, the Celsius CEO submitted his resignation letter as the firm’s CEO to the Special Committee of the Board of Directors of the company. Meanwhile, earlier in the week Core Scientific shut down 37,000 mining rigs belonging to Celsius after its failure to meet up with payment of its power bill.