Former Celsius CEO is being sued by the NY AG for scamming cryptocurrency investors

According to a statement made on Thursday, former Celsius Network CEO and co-founder Alex Mashinsky is the target of legal action brought by New York Attorney General Letitia James.

The lawsuit also claims that Mashinsky “repeatedly made false and misleading statements about Celsius’s safety to encourage investors to deposit billions of dollars in digital assets onto the platform.” James claimed that Mashinsky defrauded “hundreds of thousands of investors…out of billions of dollars worth of cryptocurrency.”

Midway through July 2022, Celsius, previously one of the biggest cryptocurrency lenders in the world, filed for bankruptcy protection. At the time, Celsius claimed to have more than 100,000 creditors and an estimated $1 billion to $10 billion in assets and liabilities.

Celsius suspended customer withdrawals in June, citing “severe market conditions,” and that block was never removed.

According to the AG office, Celsius lost hundreds of millions of dollars through reckless investments, and Mashinsky lied about and concealed Celsius’ financial situation. Mashinsky also neglected to sign up with the site as a salesperson and as a dealer in securities and commodities, it continued.

In the announcement, James stated that it was against the law to deceive investors and make false or implausible claims.

The NYAG action seeks to have Mashinsky, a New York resident, barred from conducting any business within the state and to have him pay an undisclosed amount in damages, restitution, and disgorgement.

This legal move comes after several lawsuits filed by James. Last year, the attorney general settled with the now-bankrupt BlockFi for $1 million for, among other things, issuing unregistered securities and sued Nexo for operating illegally and deceiving investors.

This revelation comes in response to a federal bankruptcy judge’s decision on Wednesday that, due to the fine print, cryptocurrencies deposited into interest-bearing accounts at Celsius Network actually belong to the company.

According to a 45-page lawsuit from the U.S., the decision grants Celsius ownership of the $4.2 billion in cryptocurrencies that users invested into its high-interest Earn program. On Wednesday, the Southern District of New York Bankruptcy Court.

According to the petition, Celsius has over 600,000 accounts in its Earn program as of July 10, 2022, with a total value of about $4.2 billion. The stablecoin portion of that worth was about $23 million.