New York sues ex-CEO of Celsius for cryptocurrency fraud

Long after fil­ing for bank­rupt­cy, cryp­tocur­ren­cy lender Cel­sius Net­work con­tin­ues to face the con­se­quences of an event­ful 2022.

New York State Attor­ney Gen­er­al Leti­tia James has sued for­mer Cel­sius CEO Alex Mashin­sky for alleged­ly defraud­ing investors of “bil­lions of dol­lars” in cryptocurrencies.

The offi­cer alleged­ly mis­led cus­tomers about Cel­sius’s dete­ri­o­rat­ing finan­cial con­di­tion and failed to reg­is­ter as a dis­trib­u­tor or trad­er of com­modi­ties and securities.

The Attor­ney Gen­er­al said Mashin­sky mis­rep­re­sent­ed low-risk invest­ments and reli­able lenders, while “rou­tine­ly” took a high-risk approach to investors that the com­pa­ny’s chiefs hid from clients.

Claim­ing a loss. He also mis­rep­re­sent­ed secu­ri­ty, strat­e­gy and user num­bers. The for­mer head of Cel­sior has been accused of deceiv­ing hun­dreds of thou­sands of investors (more than 26,000 in the state), some of whom, accord­ing to James, have gone “finan­cial­ly bankrupt.”

New York wants to ban Masin­s­ki from doing busi­ness in the state. It also seeks com­pen­sa­tion for investors, includ­ing the pay­ment of dam­ages. In a state­ment to Engad­get, Cel­sius only reit­er­at­ed that Mashin­s­ki stepped down as CEO in Sep­tem­ber and that he is “no longer involved” in run­ning the company.

Cel­sior is one of the most promi­nent vic­tims of last year’s cryp­tocur­ren­cy cri­sis. The token’s val­ue plum­met­ed from $7 in 2021 to just $3 last spring.

In par­tic­u­lar, the com­pa­ny, which had promised returns of up to 18.6% on loans with lit­tle col­lat­er­al, did­n’t have the cash to with­stand the crisis.

Last June, it tried to freeze with­drawals to sta­bi­lize its assets, but chose bank­rupt­cy the fol­low­ing month to increase its chances of rebuilding.

In this law­suit, it is unlike­ly that the omis­sion will come to an end. Sev­er­al states are inves­ti­gat­ing Cel­sior’s oper­a­tions, and the Secu­ri­ties and Exchange Com­mis­sion has also reached out to the company.

Cel­sior isn’t the only one affect­ed by the law. Just this week, cryp­tocur­ren­cy exchange Coin­base reached a $100 mil­lion set­tle­ment with New York over alleged finan­cial reg­u­la­to­ry violations.

How­ev­er, it is impres­sive that the coun­try is chas­ing Masin­s­ki direct­ly, not just the com­pa­ny he runs.