According to the Wall Street Journal, Celsius founder Alex Mashinsky is being sued by New York Attorney General Letitia James. Government officials filed a civil suit against Mashinsky, accusing him of “defrauding investors out of billions of dollars.”
Celsius Founder Could Face Time In Prison?
NY Attorney General James believes that Celsius’ founder and former CEO made false statements to customers. Mashinsky allegedly lied about the company’s financial situation and deliberately withheld information from customers.
As a result, Celsius investors lost millions of dollars when the company took “risky investments” with the funds. In the meantime, Mashinsky advertises the platform as “safer than a bank.” According to reports and lawsuits:
Alex Mashinsky promises to lead investors to financial freedom but leads them down the path of financial ruin. The law is clear that false and unsubstantiated promises and misleading investors are illegal.
Mashinsky is accused of violating the Martin Act, the WSJ added. This law allows the AG to investigate and prosecute securities and commodities fraud.
Once one of the most famous crypto lending companies in the world, Celsius was forced to file for bankruptcy protection in 2022. The company suffered the contagion created by the collapse of the crypto hedge fund Three Arrows Capital (3AC).
Celsius is one of the crypto companies that filed for bankruptcy after a continuous downward trend in the price of digital assets. The company has faced lawsuits from clients and former partners.
As Bitcoinist reported, in June 2022, Celsius’ former partner, KeyFi, filed a lawsuit against the crypto lender. KeyFi and its founder Jason Stone accused the company of running a “Ponzi Scheme” to the detriment of its clients. The lawsuit states:
(…) Not only did the Defendant (Celsius) lack basic security controls to protect billions of dollars in customer funds, but they also actively used customer funds to manipulate the crypto asset market for their own benefit.
According to documents filed by the Attorney General, more than 26,000 New Yorkers lost money on the lending platform. James wants to ban Mashinsky from trading securities and commodities in his country and take new executive responsibilities.
Celsius Has Customer Savings
Later, Mashinsky was accused of allegedly withdrawing millions of dollars before the company ceased operations and filed for bankruptcy. The co-founder was described as a liar and accused of using customer funds to “enrich himself” by KeyFi and other former partners or clients.
KeyFi’s claim details Celsius’ terms and services. Without realizing it, the crypto lender’s clients agreed to give ownership of their assets to this company.
Recently, a US court determined that $4.2 billion in digital assets kept from customers belonged to the company. This legal decision will harm thousands of customers who are waiting for the resolution of the bankruptcy process.