News - From Crypto-wealth to Court: the devastating path of Alex Mashinsky's Celsius

By Mike Hesp

From Crypto-wealth to Court: the devastating path of Alex Mashinsky's Celsius

Scams, crime and fraud
Laws and regulations

With his crypto company, he consumed several billion US dollars in customer money. Now he must answer in court.

When crypto lending service Celsius went bankrupt in July 2022, the company left behind billions in damages. To this day waiting investors on their money. A short time later, Alex Mashinsky resigned as CEO. Several U.S. authorities sued him. The Department of Justice accused him of fraud and market manipulation. In July 2023, he was arrested. Now a court must clarify Mashinksky's role in the Celsisus case.

Motion to dismiss denied

On Aug. 4, 2023, New York County Supreme Court Judge Margaret Chan denied a motion to dismiss Mashinsky's lawsuit. As a result, he must face the civil lawsuit filed in January by New York Attorney General Letitia James.

As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom, but he led them to financial ruin. The law clearly states that it is illegal to make false and unsubstantiated promises and mislead investors. Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recover their losses.

Attorney General of New York, Letitia James

According to James, Mashinsky's actions contributed to investors' losses by misrepresenting the platform's financial condition and failing to comply with certain regulatory requirements.

Mashinsky argued that the trial was flawed in its presentation of facts and legal reasoning. It was merely "a repetition of misinformation." Judge Chan ruled, however, that there were sufficient allegations to support a plausible inference that Mashinsky made misrepresentations about the disputed "earning accounts" that would have induced new investors to deposit into them.

Celsius, along with BlockFi, was one of the major lending services that paid high interest rates to users who lent their Bitcoin there. "Earn" allowed investors to use cryptocurrencies and receive a fee in return (Lending). In January 2023 the court ruled that the cryptos deposited in these accounts belonged to the bankruptcy estate. A shock to investors. Client assets worth US$4.2 billion were tied up. The lawsuit seeks to prevent Mashinsky from "doing business in New York" in the future, James said. He was also asked to pay damages to duped Celsius investors.

SEC intervenes

In addition to the lawsuit filed by the New York State Attorney General, which primarily represents the rights of the 26,000 aggrieved New Yorkers, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have also taken legal action against the ex-CEO. On July 13, the SEC filed an indictment. The charge: Mashinksy had collected "billions of dollars" through unregistered and fraudulent offerings and through illegally sold "crypto securities.

In the indictment, the SEC alleged that Mashinsky falsely promised investors a safe investment with the said "Earn Interest Program." He also allegedly manipulated the price of the proprietary Celsius token. On the day of the SEC's indictment, Mashinsky was arrested. Mashinsky has since been released on US$40 million bail.

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