NY AG Sues Alex Mashinsky, Founder of Celsius Network, Charging It Was All a Fraud

By Peter Page Peter Page has been verified by Muck Rack's editorial team
Published on January 6, 2023

Alex Mashinsky, the purportedly populist founder of crashed crypto bank Celsius Networks, has been sued by the New York Attorney General, Letitia James, for allegedly defrauding hundreds of thousands of investors.

Celsius Networks, which for years promised an eye-popping 17 percent on crypto deposits, crashed last September, the worst crypto failure up until the collapse of FTX and the arrest of founder Sam Bankman-Fried.

Lawsuit seeks to ban Mashinsky: The lawsuit alleges that Celsius customers lost billions of dollars in deposits when the company collapsed due to investment losses that were not publicly disclosed. It further alleges that Mashinsky, 57, misled customers into depositing their crypto savings on the platform with claims that Celsius deposits were as safe as deposits in a bank regulated by FDIC. The lawsuit asks that Mashinsky be banned from doing business in New York and be required to pay damages.

“When Celsius suffered losses on risky investments, Mashinsky failed to disclose these losses to investors,” the lawsuit said. “The collapse of Celsius left many individuals in a state of desperation and financial ruin.”

Mashinsky was a star while crypto boomed: Mashinsky was a new constant presence on YouTube, where he proclaimed Celsius as an egalitarian alternative to the traditional banking system, which he said (without irony) was ripping off customers. Celsius, which was based in New Jersey, managed assets valued at $20 billion at its peak in 2021. Out of the public eye, however, Celsius struggled to pay the astronomical returns promised by Mashinsky, and turned to increasingly riskier investments in search for higher returns.

“In search of revenue, Celsius moved into significantly riskier investments, extending hundreds of millions of dollars in uncollateralized loans, and investing hundreds of millions of dollars in unregulated decentralized finance platforms,” the lawsuit said.

The FTX connection: Over a two year period beginning in 2020 and 2022, the lawsuit said, Celsius lent roughly $1 billion to Alameda Research, the crypto hedge fund founded by Bankman-Fried. Celsius accepted the FTT crypto token invented by Bankman-Fried as collateral for the loans.

The price of FTT collapsed, bringing down with it both Alameda and FTX, and wiping out the investments of approximately a million people. Celsius was already in bad shape when FTT crashed. The company collapsed in June and filed for bankruptcy the following month, and Mashinsky resigned in September. Now customers are scrambling to recover what remains of their savings, recruiting lawyers to represent them in the bankruptcy process.


By Peter Page Peter Page has been verified by Muck Rack's editorial team

Journalist verified by Muck Rack verified

Peter Page is an Editor-at-Large at Grit Daily. He is available to record live, old-school style interviews via Zoom, and run them at Grit Daily and Apple News, or BlockTelegraph for a fee.Formerly at Entrepreneur.com, he began his journalism career as a newspaper reporter long before print journalism had even heard of the internet, much less realized it would demolish the industry. The years he worked as a police reporter are a big influence on his world view to this day. Page has some degree of expertise in environmental policy, the energy economy, ecosystem dynamics, the anthropology of urban gangs, the workings of civil and criminal courts, politics, the machinations of government, and the art of crystallizing thought in writing.

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