New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, a co-founder and former CEO of cryptocurrency lending platform Celsius Network LLC and its related entities, for defrauding hundreds of thousands of investors, including more than 26,000 New Yorkers, out of billions of dollars worth of cryptocurrency.

The lawsuit alleges that Mashinsky repeatedly made false and misleading statements about Celsius’s safety to encourage investors to deposit billions of dollars in digital assets onto the platform. As Celsius lost hundreds of millions of dollars of assets in risky investments, Mashinsky misrepresented and concealed Celsius’s deteriorating financial condition. Mashinsky also failed to register as a salesperson for Celsius and as a securities and commodities dealer.

Attorney General James’ lawsuit seeks to ban Mashinsky from doing business in New York and require him to pay damages, restitution, and disgorgement.

Celsius, which filed for Chapter 11 bankruptcy in July 2022, is a cryptocurrency lending platform where investors could deposit their cryptocurrency in return for promises of high yields on those digital assets. Mashinsky was Celsius’s public face, appearing regularly in interviews, at cryptocurrency conferences, and on social media to promote the platform and recruit investors.

Mashinsky made numerous false and deceptive statements about Celsius’s safety, number of users, and investment strategies to recruit investors, and repeatedly asserted that Celsius was safer than a bank. However, banks are highly regulated by state and federal government agencies and subject to regular and robust examinations, while Celsius was not subject to such regulatory requirements. Neither Celsius nor its customers had any hope of receiving the same protections as banks.

Mashinsky repeatedly claimed that Celsius made safe, low-risk investments and only lent assets to credible and reputable entities. However, investors’ assets were routinely exposed to high-risk counterparties and strategies, many of which resulted in losses that Mashinsky concealed from investors.

Through her lawsuit, Attorney General James seeks to permanently bar Mashinsky from engaging in any business relating to the issuance, offer, or sale of securities or commodities in New York; stop him from serving as a director or officer of any company doing business in New York; and secure disgorgement of any proceeds derived from Mashinsky’s unlawful conduct, as well as damages and restitution for investors.