The Attorney General of New York State has filed a lawsuit against the co–founder and former CEO of bankrupt crypto lender Celsius Network.

New York Attorney General Letitia James said she was suing Alex Mashinsky for defrauding investors out of billions in cryptocurrency. James added that 26,000 New Yorkers were among the hundreds of thousands of Mashinsky’s victims.

“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” said Attorney General James. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal.

Case against Mashinsky

Attorney General James is accusing Mashinsky of repeatedly making false and misleading statements regarding Celsius’ safety. As the platform’s public face, Mashinsky regularly entreated investors to deposit with Celsius in exchange for high crypto yields.

However, James maintains that Mashinsky also made numerous false and deceptive statements to recruit investors, such as lying about the platform’s user numbers. Also, while repeatedly asserting that Celsius was safer than a bank, Mashinsky insisted that it only made safe, low-risk investments. In reality, James said, Mashinsky routinely exposed investors’ assets to high-risk counterparties and strategies.

Repercussions

As Celsius lost hundreds of millions of dollars to these risky investments, Attorney General James asserts that Mashinsky proceeded to misrepresent and conceal Celsius’s deteriorating financial condition. Finally, she also claims that Mashinsky failed to register as a salesperson for Celsius, in addition to a securities and commodities dealer.

James hopes to achieve three goals through her lawsuit against Mashinsky. First, she is seeking to permanently bar Mashinsky from engaging in the issuance, offer, or sale of securities or commodities. She is also looking to bar him from serving as a director or officer of any company in New York. Finally, James hopes to secure damages and restitution for investors.

James is formally indicting Celsius and Machinsky following an investigation of the collapse over the past year. A few months ago, she asked victims of any crypto collapses, including Celsius, to come forward with their testimonies. The indictment, as well as charges against Sam Bankman-Fried, should give pause to the responsible parties of other large collapses. In fact, Three Arrows Capital (3AC) founders Zhu Su and Kyle Davies were just subpoenaed on Twitter.