Mashinsky did not immediately respond to requests for comment. "Alex Mashinsky is no longer employed by Celsius and is not involved in the management of the company," a spokesperson for Celsius told CNBC. At the time, he apologized for the "increasing distraction" that his leadership had caused. Mashinsky resigned from his position as CEO in September. Celsius entered bankruptcy proceedings with only $1.75 billion in crypto assets, a far cry from the $4.7 billion it owed users. of New York Mellon (NYSE: BK), 114 Bank Technology, 193 BankMobile, 13 Bar. "Mashinsky never disclosed that Celsius had close to a billion-dollar deficit," the complaint alleges. What Investors Should Know About FinTech, High-Frequency Trading, and Flash. Those statements were false, James' complaint alleges, and were part of a wider campaign to prevent user outflows that could have precipitated a run on the bank similar to what happened at FTX, another bankrupted exchange.īut Mashinsky made "materially false and misleading" statements designed to hide the actual extent of Celsius' exposure, claiming that the crypto exchange had "billions in liquidity" just days before Celsius filed for bankruptcy on July 13, 2022, the complaint alleges.Ĭelsius investors were left bereft and so despondent that some considered suicide, CNBC previously reported. Mashinsky claimed that Celsius had "very small losses" and that the exchange had "basically reduced or eliminated any exposure" to borrowers with investments in terra or luna. The crash of cryptocurrencies terra and luna in 2022 forced 3AC into bankruptcy and deepened an ongoing "crypto winter." Celsius was exposed to the fall of terra and luna both through loans to 3AC and through $935 million of direct investment in "highly speculative" terra bets, all funded by investor funds, the complaint said. Celsius, like similarly bankrupt Voyager Digital, was able to pay out yields as high as 17% by lending customer assets to crypto hedge funds, including now-collapsed Three Arrows Capital, known as 3AC, and Sam Bankman-Fried's Alameda Research. The Martin Act gives prosecutors sweeping search and subpoena powers to investigate potential wrongdoing.Ĭelsius offered sky-high yields that lured investors in and swelled the exchange's coffers. The action is civil, not criminal, and was brought under the Martin Act, New York state's wide-ranging securities law. The attorney general's office is seeking to fine Mashinsky and levy monetary damages, and bar him from leading a company or working in the securities industry in New York. "As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin," James said in a statement. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit
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