Former Celsius Network CEO Alex Mashinsky Faces Civil Fraud Lawsuit in New York Court

Alex Mashinsky, the founder and former CEO of the now-defunct crypto lender Celsius, a Manhattan state court judge denied his motion to dismiss a civil lawsuit brought against him by New York Attorney General Letitia James. The decision, delivered on August 4, paves the way for the lawsuit to proceed, as reported by Bloomberg.

The civil lawsuit, filed by Attorney General Letitia James in January, alleges that Mashinsky committed civil fraud by repeatedly making false and misleading claims about the safety of investments made through Celsius and concealing the risks involved. The suit accuses Mashinsky of swindling billions of dollars worth of cryptocurrency from hundreds of thousands of investors.

Alex Mashinsky

New York County Supreme Court Justice Margaret Chan, who presided over the case, highlighted in her ruling that there were sufficient allegations to support a plausible inference that Mashinsky’s alleged misstatements induced or promoted new investors to deposit assets in Celsius’s earned-interest accounts. This ruling suggests that the case has a strong basis and merit to proceed.

The downfall of Celsius started with the company’s filing for bankruptcy in July 2022, merely a month after freezing customer withdrawals. Court filings revealed a massive $1.19 billion hole in Celsius’s balance sheet at the time of bankruptcy. This financial turmoil raised red flags and drew the attention of the New York Attorney General’s office, leading to the subsequent civil lawsuit.

The suit, brought by New York’s top law enforcement officer, aims to not only seek justice for the affected investors but also to blacklist Mashinsky from engaging in any state-related business pertaining to securities or commodities issuance, offer, or sale. Additionally, it seeks to prevent him from holding any directorial or officer position in any New York-based company in the future.

Alex Mashinsky’s legal troubles do not end with the civil lawsuit. In addition to this case, he is also facing federal charges, further complicating his legal situation and raising the stakes of the ongoing legal battle.

The legal process is likely to be lengthy and complex, with both parties expected to present their evidence and arguments in the court of law. As the lawsuit progresses, the public will keep a keen eye on how the case unfolds and how the legal system addresses allegations of fraud in the fast-evolving world of cryptocurrencies.

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