Former Celsius Network Limited Chief Executive Officer Alex Mashinsky was ordered by the judiciary of New York County to appear in a civil fraud lawsuit filed by New York’s Attorney General. New York County Supreme Court Justice Margaret Chan has denied the former Celsius Network CEO’s motion appealing that the Manhattan State Court dismiss a case filed by New York Attorney General (NYAG) Letitia James.
A court order issued Friday denied the Celsius Network CEO’s motion to dismiss the suit by the aforementioned big-shot law enforcement officer in New York, who brought the case about six months before the former CEO was pummelled with several federal criminal charges. While announcing the ruling, Justice Chan observed, “There are adequate charges to support a plausible inference that Mashinsky’s alleged inaccuracies in his statements prompted or pushed new investors to deposit assets in Celsius’ earned-interest accounts.”
According to media reports, the honourable United States Judge said in her verdict that James’ lawsuit should be allowed to proceed since there is enough circumstantial evidence to support the case against Mashinsky.
Letitia fights back against Alex’s fabrications
Celsius’s demise began with the firm declaring insolvency in July 2022, just a month after restricting consumer withdrawals. Celsius’s balance sheet had shown an immense $1.19 billion deficit when it filed for bankruptcy, according to court records. This whopping monetary mismatch raised numerous alarms and palpably attracted the scrutiny of the New York Attorney General’s office, soon resulting in the civil case.
James is believed to have launched the complaint against Mashinsky in January after learning of the former CEO’s exaggeratedly fraudulent and deceptive assertions about Celsius Network’s financial health. Furthermore, the former CEO of the defunct crypto lender is accused of enticing thousands of investors to deposit digital stocks on the site with a cumulative worth equivalent to approximately billions of dollars.
Authorities believe that from 2018 until June 2022, Mashinsky contrived a wide-ranging machination to deceive Celsius customers about the “core aspects” of the company’s operation and balloon the market value of its patented token, CEL – as per the indictment previewed last month in Manhattan.
In response, Mashinsky submitted a request to dismiss the NYAG’s complaint, claiming that the claimed deceptive comments were “non-actionable puffery” made during the weekly “Ask Mashinsky Anything” session online and completely irrelevant. However, the Manhattan-based Judge, having regard to the Celsius Network CEO’s motion, set aside this argument. Instead, she believed that the allegations against Mashinsky wholly and beyond reasonable doubt depict an attempt by the “individual actively misrepresenting the financial condition of his company to keep it afloat.”
In one illustrious instance, as was noted by the Bench, the attorney general materially displayed that Mashinsky had claimed that nearly 2 million people earned substantial yield on their crypto despite the fact that many Celsius users hadn’t even transferred assets to the platform.
Aftermath
Chan stated that James might bring certain accusations under the Martin Act, a robust State securities statute and that the “earned interest accounts” offered by Celsius constituted securities under the laws of the State. As a consequence of the Celsius Network CEO’s motion, he is also being sued in civil court by the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Federal Trade Commission. If Letitia succeeds in the suit, it would lead to the permanent debarring of Mashinsky from undertaking any business relating to the issuance and trade of securities in the State. It shall also stop him from serving as any business company’s incumbent official in New York.
The Attorney General, in a reported statement, said that the verdict ”should serve as another reminder to crypto companies that we will use the full extent of the law against those who defraud investors.”
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