New York Attorney General Letitia James has filed a civil lawsuit against Alex Mashinsky, the founder of bankrupt cryptocurrency platform Celsius Network. The suit alleges that Mashinsky defrauded hundreds of thousands of investors by making false and misleading representations to induce them to deposit billions of dollars in digital assets with the platform, while concealing risky investment strategies. The suit comes after a federal judge ruled that customers of Celsius’s interest-bearing earned product had turned over control of their assets to the platform, making all 4.2 billion of crypto deposits property of Celsius. This ruling has potential ramifications for other crypto investors using similar products across other platforms.
New York Attorney General Sues Founder of Celsius Network
In big news for the cryptocurrency world, New York’s attorney general has filed a civil lawsuit against the founder of the now-bankrupt Celsius Network, Alex Mashinsky. The AG’s office alleges that Mashinsky engaged in a “scheme to defraud hundreds of thousands of investors” by using false and misleading information to induce them to deposit billions of dollars in digital assets with Celsius Network. The Complaint states that Maschinsky promised customers Celsius was a safe alternative to banks while concealing the platform was engaging in risky investment strategies.
The Lawsuit and Its Allegations
The lawsuit alleges that Mashinsky’s actions have caused significant harm to investors, with the complaint stating that he “lied to people about the risks of investing in Celsius, hid its deteriorating financial condition, and failed to register in New York.” Further, it accuses him of these actions to defraud hard-working people by promising them big returns, leaving them in financial ruin.
Celsius filed for bankruptcy in July 2022, prompting consternation, outrage, and even threats of suicide from customers who claimed to have lost their entire life savings to the platform. Court filings subsequently revealed that the company had a $1.19 billion hole in its balance sheet. Celsius insiders have claimed that the hole was partially due to Mashinsky’s use of customer funds to directionally trade Bitcoin against the advice of multiple senior figures at the firm.
In other news for Celsius Network customers, a federal judge has ruled that customers of Celcius’s interest-bearing earned product had turned over control of their assets to Celsius than a bankrupt crypto lender. Meaning those assets are part of the company’s bankruptcy estate. The judge ruled that the terms of service for Celsius were unambiguous in ruling that assets held and deposited on the Celsius earned platform belong to Celsius, not to the customers. This means that users gave up their legal right to their Bitcoin by using the Celsius platform, and all 4.2 billion of crypto deposits into Celsius are now the property of Celsius.
Implications for Crypto Investors
This ruling allowing Celsius to retain control over the assets in its earn account will have significant ramifications for crypto investors using similar products across other platforms, a number of which have also entered bankruptcy in recent months. The takeaway for crypto customers is to read the terms of service of the platforms they’re using. This rule applies to any crypto platform where users are giving them their assets; users need to read and understand the terms of service fully.
The lawsuits against Mashinsky and the court ruling have significant implications for the cryptocurrency world. While customers are understandably upset at the loss of their assets, it’s crucial to read and understand the terms of service before depositing funds with any platform. As the cryptocurrency world continues to evolve rapidly, keeping abreast of changes and taking necessary precautions is essential.