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NY Attorney General files suit against Celsius

On Behalf of | Jan 23, 2023 | Government Regulation, Whistleblower Protection

On January 5, Attorney General Letitia James filed a lawsuit against Celsius and Alex Mashinsky, the former CEO and co-founder of the cryptocurrency lending platform Celsius Network LLC. The suit alleges that the now-bankrupt company defrauded 26,000 New Yorkers and hundreds of thousands of other investors for billions of dollars.

To attract more investors, Mashinsky (Celsius’s public face) misrepresented the company’s health through repeated misleading or fraudulent statements regarding the platform’s safety (calling it “safer than a bank”), the number of investors, and investment strategies. This misinformation propagated a Ponzi-like scheme that hid the company’s true health.

The OAG claim

According to the Office of the Attorney General’s (OAG) press release, Mashinsky encouraged investors to deposit their cryptocurrency with the promise of providing high yields. Launching the company in 2017, he positioned the company as a safe and subversive alternative to traditional banks. The company grew to $20 billion worth of crypto assets before the bottom fell out. The company filed bankruptcy in July 2022.

“Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” said James. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal.”

The lawsuit seeks to recoup losses on behalf of the investors. Attorney General James also seeks to bar Mashinsky from serving as director of any company doing business in New York or selling commodities or securities here. In September 2022, James filed a lawsuit against Nexo for defrauding investors and illegal operations.

Whistleblowers encouraged to come forward

James and the OAG encourage workers in the cryptocurrency industry to come forward if they witness fraud or misconduct and file a whistleblower complaint.