Who would have thought that the once-booming crypto industry would have to fight so many legal battles? While former FTX CEO Sam Bankman-Fried is still making headlines amidst his court cases, Celsius Network CEO Alex Mashinsky has been sued for defrauding investors.
Celsius Network filed for Chapter 11 bankruptcy in July 2022, claiming it would help the company stabilize and develop a restructuring plan. After filing for bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York, the CEO boasted that he had a strong and experienced team to help him through the restructuring process.
Before filing for bankruptcy, Celsius halted customer withdrawals in June, citing “extreme market conditions“. The CEO resigned in September, shortly after withdrawing $10 million from Celsius a few weeks before the company stopped withdrawals.
New York attorney general sues ex-CEO of Celsius Network
Letitia James, New York State Attorney General revealed on Twitter that she is suing the former head of Celsius Network for defrauding investors of billions of dollars. She wrote that Mashinsky misled people about the risks associated with investing in the crypto-currency company. In a statement, she explained that he failed to disclose the company’s deteriorating financial condition to his clients and also failed to register in New York.
I’m suing the former CEO of cryptocurrency platform @CelsiusNetwork for defrauding investors out of billions of dollars.
Alex Mashinsky lied to people about the risks of investing in Celsius, hid its deteriorating financial condition, and failed to register in New York.
– NY AG James (@NewYorkStateAG) January 5, 2023
The attorney general added that the former CEO of Celsius Network “deceived hard-working people into investing their savings in Celsius.“To make the deception attractive, the executive promised substantial financial returns to investors and claimed that the platform was safer than a financial institution. However, these promises and claims were not successful, as Celsius collapsed and investors were left with losses.
“I am suing to get New Yorkers their money back and to prohibit Mashinsky from doing business in New York. We will continue to protect people from the risks of investing in crypto-currencies.”
In addition, the lawsuit addressed how the ex-CEO was not honest about his claims about the number of Celsius users. In response to a Twitter thread from the attorney general, U.S. stockbroker Peter Schiff asked what took the lawyer so long. He referred to a YouTube video posted last year about the Mashinsky scam before the crash.
Schiff is a known critic of bitcoin who believes bitcoin will eventually fall. He said in August that bitcoin was on the verge of falling below $10,000, claiming that the cryptocurrency market’s rise was not sustainable. He bluntly noted that the market was going to plunge and advised people who benefited from the rally to pull out. According to him, some people bought BTC years ago and made enough profit from it. So these investors should get rid of bitcoin to avoid tragic stories.