Celsius founder and CEO sued by New York Attorney General for defrauding investors

• Celsius Network founder has been alleged to have hidden the company’s dire financial conditions.
• New York Attorney General Letitia James is looking to ban Celsius Network’s ex-CEO Alex Mashinsky from doing business in the state.
•  US Bankruptcy Judge rules Celsius owns $4.2 billion worth of crypto assets in its “Earn” accounts.

Celsius Network filed for bankruptcy almost six months ago, in July 2022. Since then, attempts at settling its debts and liquidation have been underway.  While the bankruptcy case develops, New York Attorney General Letitia James has sued Celsius Network’s former CEO, Alex Mashinsky.

Celsius Network founder faces lawsuit

Celsius Network’s former head Alex Mashinsky, as per the court filing, is facing a lawsuit for defrauding hundreds of thousands of investors, which includes more than 26,000 New York citizens. 

Attorney General James claims that Celsius Network’s founder made false and misleading statements about the company’s financial condition, which was deteriorating rapidly. In addition to this, the lawsuit also claims that Mashinsky failed to register as a salesperson and a securities and commodities dealer for Celsius. James was noted saying,

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

With this civil lawsuit, James is seeking to ban Alex Mashinsky permanently from conducting any business in New York as well as bar him from being part of any company in the state. Additionally, Attorney General James is looking to recoup the losses suffered by investors at the hands of Mashinsky. James added,

“Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses. My office will stay vigilant and ensure that bad actors trying to take advantage of New York investors are held accountable.”

Celsius Network owns $4.2 billion worth of cryptocurrencies

Since the bankruptcy, attempts at settling its debts and liquidation have been underway. While the assets in its name have been contemplated when it comes to ownership, the bankruptcy court seems to have solved this issue by awarding the company entire ownership of its Earn accounts’ assets. 

Celsius Network won the ownership of $4.2 billion worth of cryptocurrencies as the court ruled in favor of the bankrupt company on Wednesday. US Bankruptcy Judge Martin Glenn stated that upon depositing the cryptocurrencies in Celsius’ Earn accounts, the digital assets became the property of Celsius. 

Thus, as long as these assets remain in the Earn accounts, they are part of Celsius’ bankruptcy estates. This translates to the customers losing any possibility of recouping the investment that they lost after Celsius filed for bankruptcy.