James accuses ex-Celsius CEO of fraud

Former Celsius Network chief executive Alex Mashinsky, whose once highflying crypto lender went bankrupt last year, was sued for alleged fraud by the New York attorney general — the latest fallout from turmoil in the industry.

Mashinsky, who co-founded Celsius, duped hundreds of thousands of investors out of billions of dollars of cryptocurrency by repeatedly making false and misleading statements about the lender’s safety, according to a suit filed Thursday in Manhattan. The alleged scheme ran from 2018 to June 2022, when Celsius froze withdrawals.

“Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” New York Attorney General Letitia James said in a statement. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal.”

New York’s lawsuit aims to permanently bar Mashinsky from doing any business relating to the issuance, offer or sale of securities or commodities in the state. It also seeks to stop him from serving as director or officer of any company doing business in New York. If James prevails in the case, she will seek the return of any proceeds from Mashinsky’s allegedly unlawful conduct, plus damages and restitution for customers.

Mashinsky didn’t immediately respond to a message seeking comment.

It’s the latest blow to the industry’s image after the arrest last month of former cryptocurrency mogul Sam Bankman-Fried on fraud charges and the collapse of his FTX empire. James, who has raised the alarm about crypto risks since early 2021, has engaged in several enforcement actions in the industry, including suits last year against Nexo and a nearly $1 million settlement with crypto platform BlockFi Lending.

Celsius filed for bankruptcy in July amid a $2 trillion market crash that wiped out some of the industry’s biggest names and exposed hundreds of thousands of investors to steep losses. The lender, which had made risky bets before the collapse, at the time disclosed a $1.19 billion deficit. Celsius said previously that Alameda Research, the trading firm co-founded by Bankman-Fried that’s now at the center of his criminal case, owes the lender $12 million.