New York Attorney General is seeking to bar Alex Mashinsky from working in the securities industry or as an executive in New York.

LAGOS (CoinChapter.com) — New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, Celsius Network co-founder and former CEO, accusing him of defrauding hundreds of thousands of investors.

In detail, the New York attorney-general via her official Twitter handle on Jan. 5 disclosed her decision to hit Mashinsky with a civil lawsuit for flouting the state’s securities laws. She alleged that Mashinsky deliberately defrauded investors out of billions of dollars worth of cryptocurrency.

James in the lawsuit also claims that Mashinsky repeatedly made false and misleading statements about Celsius’s safety. According to her, the 57-year-old who established Celsius in 2017 concealed the actual financial state of the crypto lending platform so as to deceive investors into depositing billions of dollars.

Going further the attorney-general’s office claimed Mashinsky acted as a “modern-day Robin Hood”, promising customers returns of up to 17% through its Earn program, urging users to stay invested even as the hole in the platform’s balance sheet grew larger.

“Mashinsky tricked hardworking people into investing their life savings into Celsius, promising big financial returns and claiming the platform was safer than a bank. Instead, Celsius collapsed and New Yorkers were left in financial ruin.”

Additionally, they said Mashinsky also failed to register as a salesperson for Celsius. He also did not register Celsius as a securities and commodities dealer under New York law.

‘Alex Mashinsky Should Be In Prison’

Meanwhile, crypto investors affected by Celsius Network collapse have expressed delight with James’s announcement. In fact, Nick Drakon on Twitter noted that the 57-year-old should be in prison for defrauding them.

“Thank you @NewYorkStateAG. Thank you for doing something and setting an example. Mashinsky & Celsius are frauds who should return every cent of customer deposits back to the rightful owners. And they should never be allowed to do business in any part of the USA again.”

Another aggrieved investor tweeted.

James’s office also revealed that a disabled veteran was among the New Yorkers to have lost money with Celsius. The veteran reportedly invested a decade’s worth of savings totaling $36,000 into the now-collapsed platform. Additionally, another disabled citizen making just $8 per hour lost his entire investment on the platform.

It is important to note that if the New York Attorney General’s lawsuit succeeds, Mashinsky could be barred from doing business in New York. He might also be ordered to repay investors their funds.

Furthermore, another Twitter user called on California Attorney General Rob Bonta to also follow in James’s footsteps. She decried the spate at which Celsius’s current bankruptcy hearing is going saying “many of us are losing hope that we’ll ever see our deposits returned to us. #CelsiusBankruptcy.”

Celsius Earn Account Funds Belong To Estate, Not Users

In a separate development, James’s suit comes after a ruling issued in a New York bankruptcy court on Jan. 4 found Celsius’s “unambiguous” terms of service made it clear that crypto assets deposited in the company’s Earn Accounts were Celsius’s property.

The verdict gives Celsius ownership of the $4.2 billion in cryptocurrency that users deposited into its high-interest Earn program. Recall that in July last year, Celsius had approximately 600,000 accounts in its Earn program.

The court also determined that Celsius’ bankruptcy estate can sell $18 million worth of stablecoins which were deposited in Earn accounts to fund administrative expenses.

Notably, the Earn program allows Celsius users to deposit cryptocurrencies and receive weekly interest payments. Furthermore, depending on the time horizon and token, the platform offered as much as 18% interest annually.

“Earn Assets in Earn Accounts constitute property of the Estates, and that the Debtors may sell stablecoins outside of the ordinary course of business.”

US bankruptcy Judge Martin Glenn said in his ruling.

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Filed under: Bitcoin - @ January 6, 2023 2:27 am