In a significant legal development, the founder and former chief of the now-bankrupt cryptocurrency lender Celsius Network, Alex Mashinsky, must confront a lawsuit filed by New York Attorney General Letitia James. The lawsuit alleges civil fraud and accuses Mashinsky of deceiving investors.
The ruling was handed down by Justice Margaret Chan of a Manhattan state court. She found that the attorney general’s claims had sufficient grounds, specifically stating that Mashinsky had defrauded investors. He allegedly did this by promoting Celsius as a secure alternative to traditional banks while hiding its underlying risks, which included substantial investment losses amounting to hundreds of millions of dollars.
According to the lawsuit, filed in the month of April, both Mashinsky and Celsius made misleading statements regarding the company’s financial health. The objective was to attract investors and persuade them to invest in the venture. The attorney general’s office further asserts that Celsius engaged in market manipulation by artificially inflating the value of its CEL token.
Alex Mashinsky has strongly refuted all the allegations, firmly calling them “baseless.” He contends that Celsius was a legitimate business and its troubles were a result of being entangled in the broader cryptocurrency market crash that affected many players in the industry.
The recent ruling, though a setback for Mashinsky, does not conclude the legal proceedings. Instead, it sets the stage for a trial where the attorney general’s office will need to substantiate its claims.
This lawsuit is just one of several legal challenges confronting Celsius. The company is currently dealing with a bankruptcy proceeding and a separate lawsuit initiated by the U.S. Securities and Exchange Commission.
