One affected New Yorker had mortgaged two properties in order to invest in Celsius — enticed by the promise of up to 18% in interest.
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The former CEO of Celsius Network is being sued by New York's Attorney General for "defrauding hundreds of thousands of investors out of billions of dollars."
Alex Mashinsky, who stepped down as head of the embattled crypto lender weeks after it was tipped into bankruptcy, is accused of "repeatedly making false and misleading statements."
New York's AG, Letitia James, alleges that 26,000 investors in the state were affected when Celsius went under — and Maskinsky "misrepresented and concealed Celsius's deteriorating financial condition."
One affected New Yorker had mortgaged two properties in order to invest in Celsius — enticed by the promise of 18.63% interest, which is far more generous than what's on offer from banks. Meanwhile, a disabled veteran lost $36,000 — savings they had accrued over a decade.
The lawsuit aims to bar Mashinsky from serving as a director of any company doing business in New York — and secure damages and restitution for the investors who were affected. In a statement, the attorney general said:
"As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin. The law is clear that making false and unsubstantiated promises and misleading investors is illegal."
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Celsius Network sent shockwaves through the crypto world last June when it abruptly halted withdrawals because of "extreme market conditions."
Just hours before this announcement was made, Mashinsky had denied accounts were locked — lashing out at "FUD and misinformation" in a now-deleted tweet.
New York's attorney general has taken issue with the entrepreneur's "deceptive" statements about Celsius Network's safety, as well as its investment strategy — pointing to his repeated assertions that the crypto lender was safer than a bank. James argues this is not the case because traditional financial institutions are highly regulated, and her statement added:
"Neither Celsius nor its customers had any hope of receiving the same protections as banks."
Letitia James went on to question Mashinsky's assertion that Celsius "made safe, low-risk investments and only lent assets to credible and reputable entities." In reality, she says customer assets were "routinely exposed" to risky strategies — and subsequent losses were hidden from the public, leaving countless individuals in a state of financial ruin.
All of this comes after Celsius Network users were dealt another blow in an attempt to recoup some of the assets that have been lost since the crypto lender went bust.
An estimated 600,000 people had entrusted $4.2 billion into its Earn program, which offered interest rates that were simply too good to be true.
A judge has now ruled that Celsius Network's terms of use were unambiguously clear — and these assets belong to the company. This means most customers will be at the back of the queue when it comes to payouts from the bankruptcy estate.
The ruling also paves the way for Celsius to sell $18 million worth of stablecoins to generate liquidity, amid fears that it will run out of cash in the next two months.
