The official committee of Celsius creditors proposed to sue Celsius founder Alex Mashinsky and other executives for “fraud, negligence, mismanagement and acts of self-interest” that ultimately led to the collapse of the crypto lender.
In the proposed complaint filed in the New York Bankruptcy Court on February 14, lawyers representing the Official Committee of Unsecured Creditors said the move follows six months of investigations into Celsius’ current and former directors, officers and employees.
The committee consists of seven Celsius account holders and was appointed by the US Trustee in July 2022. The committee represents the interests of Celsius account holders along with unsecured creditors.
1-In connection with the investigation, the UCC has determined claims and causes of action brought by Celsius against Alex Mashinsky and other insiders for breach of fiduciary duty, fraudulent transfer, and other causes of action.
— Celsius Official Committee for Unsecured Creditors (@CelsiusUcc) February 14, 2023
“The Committee’s investigation has uncovered claims and causes of action based on fraud, recklessness, gross mismanagement, and acts of self-interest by the Debtors’ former directors and officers,” wrote attorneys from White & Case LLC.
The proposed lawsuit – which seeks damages in an amount to be proven at trial – aims to bring claims and causes of action against Celsius executives, related persons and entities:
- Alex Mashinsky, co-founder, director and former CEO
- Daniel Leon, co-founder, director and former CSO and COO
- Hanoch “Nuke Goldstein, co-founder and CTO
- Harumi Urata-Thompson, former CFO and CIO
- Jeremie Beaudry, former General Counsel and CCO
- Johannes Treutler, former head of the Celsius trading desk and the person responsible for buying CEL tokens on behalf of Celsius
- Aliza Landes, former VP of Lending of Celsius and wife of Daniel Leon
- Kristine Mashinsky, wife of Alex Mashinsky
“Mr. Mashinsky, Mr. Leon, Mr. Goldstein, Mr. Beaudry, Ms. Urata-Thompson, and Mr. Treutler breached their fiduciary duty to Celsius,” the lawyer wrote, adding:
“The party knew that Celsius was promising customers interest payments that they couldn’t deliver and did nothing to fix the problem.”
The lawyer also said that the executives made “negligent, reckless (and sometimes self-interested) investments” causing Celsius to lose $1 billion in one year, while mismanagement caused another quarter of a billion dollars in losses “because it could not meet the company’s asset and liability accounts.”
“After the loss, they did not invest or develop the company’s systems to solve the problem, causing more losses,” he said.
The motion also alleges executives directed Celsius to spend “hundreds of millions of dollars” on the public market to inflate the price of CEL tokens, while they “secretly sold tens of millions of CEL tokens (or knew of such sales)” for them. own benefits.
“They sat idly by while Mr. Mashinsky recklessly handled hundreds of millions of dollars in cryptocurrency market movements. They covered up Mr. Mashinsky’s repeated lies about Celsius’ investments and financial situation.
related: The judge denied a motion from Celsius users who wanted their assets back
“Finally, when it became apparent that Celsius would have to file for bankruptcy, the Prospective Defendants withdrew their assets from the sinking ship. […] while actively encouraging customers to keep their assets on the Celsius platform,” added the lawyer.
Celsius’ creditor committee said the proposed complaint was only the “first of many steps” in its investigation into potential wrongdoing by former Celsius executives and the return of assets to victims.
5-The purpose of the UCC, as always, is to maximize recovery for the benefit of Celsius customers and unsecured creditors who are victims of the negligent, reckless, and fraudulent actions of Mr. Mashinsky and others.
— Celsius Official Committee for Unsecured Creditors (@CelsiusUcc) February 14, 2023
A hearing on the proposed complaint is scheduled for March 8, 2023.
Cointelegraph contacted Celsius for comment but did not receive an immediate response.