Alex Mashinsky, founder and former CEO of bankrupt cryptocurrency finance company Celsius Network, appears in Manhattan Federal Court in New York City, USA, July 25, 2023.Reuters/Brendan McDiarmid/File Photo
NEW YORK, Aug. 4 (Reuters) – Alex Mashinsky, founder and former chief executive of bankrupt cryptocurrency bank Celsius Network, faces civil fraud charges against New York Attorney General Letitia James. A Manhattan state court judge ruled that it was necessary to come. on friday.
Judge Margaret Chan said the Attorney General fully alleges that Mashinsky misled investors by promoting Celsius as a safe alternative to banks and concealing risks, including hundreds of millions of dollars in investment losses. Stated.
Chan also said James could pursue some claims under the Martin Act, a powerful state securities law, and that the “interest accounts” offered to customers by Celsius are classified as securities under state law. said he was qualified for
The Attorney General’s lawsuit states, “The damages suffered by investors arose, at least in part, from Mr. Mashinsky’s allegations of misrepresentation made in New York regarding Celsius’ overall financial health and investment security. It supports the reasonable inference that,” Chan said in the judgment on page 25.
Mashinsky has separately pleaded not guilty to criminal fraud charges brought by the US Department of Justice in connection with Celsius’ death.
He is also facing related civil lawsuits by the US Securities and Exchange Commission, the US Commodity Futures Trading Commission and the US Federal Trade Commission.
Attorneys for Mr. Mashinsky in the New York civil suit did not respond to a request for comment.
In a statement, James said the decision “should serve as a reminder to cryptocurrency companies that we will use the fullest extent of the law against those who defraud investors.”
Crypto financiers such as Hoboken, New Jersey-based Celsius have grown rapidly amid soaring digital asset prices during the COVID-19 pandemic.
Lenders promised depositors easy loan access and high interest rates, and then lent the tokens to institutional investors in hopes of profiting from the difference.
Celsius was founded in 2017 and charged 17% interest on some deposits when it sought Section 11 protection in July 2022, according to regulatory and court filings. had a balance sheet deficit of $1.19 billion.
The bankruptcy comes a month after Celsius froze withdrawals and transfers for 1.7 million customers, citing “extreme” market conditions.
The case is New York v. Maschinski, Supreme Court of New York, County of New York, No. 450040/2023.
Reported by Jonathan Stempel, New York.Editing: Will Dunham, Cynthia Osterman
Our criteria: Thomson Reuters Trust Principles.
