Judges dismisses Celsius CEO’s motion to toss NYAG’s lawsuit
A Manhattan state court judge, Justice Margaret Chan, ruled that Alex Mashinsky, the founder and former chief of the now-bankrupt cryptocurrency lender Celsius Network, must face a lawsuit brought against him by New York Attorney General Letitia James.
The lawsuit accuses Mashinsky of civil fraud. He pleaded not guilty to criminal fraud charges tied to Celsius’ demise.
According to Justice Chan’s 25-page decision, the attorney general’s lawsuit presents enough evidence to support the claim that Mashinsky defrauded investors. The lawsuit alleges that Mashinsky made misrepresentations about Celsius Network, portraying it as a safe alternative to traditional banks while concealing its risks, including investment losses amounting to hundreds of millions of dollars.
The ruling implies that the lawsuit will proceed, allowing the attorney general to pursue her case against Mashinsky for civil fraud and hold him accountable for the alleged misconduct related to Celsius Network’s operations and its impact on investors.
“There are sufficient allegations to support a plausible inference that Mashinsky’s alleged misstatements induced or promoted new investors to deposit assets in Celsius’ earned-interest accounts,” Justice Chan said in her ruling.
Alex Mashinsky entered a plea of not guilty to securities fraud charges. Shortly after his arrest in July, he was released on bail by a US District Judge.
Per court documents, the bail amount was set at $40 million. Furthermore, Mashinsky surrendered his travel documents to the authorities. His travel will be limited to the New York area, and he is prohibited from opening any new financial, business, or personal bank accounts, lines of credit, or cryptocurrency accounts without prior approval.
During a hearing at the Manhattan federal court, Alex Mashinsky pleaded not guilty to multiple charges, including securities, commodities, and wire fraud, as well as manipulating the price of CEL tokens. Celsius’ chief risk officer, Roni Cohen-Pavon, is also facing the same charges. If found guilty, both executives could face lengthy prison sentences, spanning several decades.
Meanwhile, the collapsed lender agreed to pay $4.7 billion in a settlement with the Federal Trade Commission. Incidentally, the amount coincidentally matches the approximate debt Celsius owes to 1.7 million customers whose funds were frozen when the exchange ceased withdrawals last year.
As part of the settlement, Celsius will be permanently prohibited from engaging in the offering, marketing, or promotion of any product or service that facilitates the deposit, exchange, investment, or withdrawal of assets.
According to the FTC, the settlement amount will not be paid until Celsius returns the remaining customer assets through the ongoing bankruptcy proceedings. To facilitate this, Celsius is anticipated to sell its altcoin holdings or convert them into Bitcoin or Ether, a process that is expected to take place this month.
