Letitia James, the Attorney General of the State of New York, has charged Alex Mashinsky, the Co-Founder of a bankrupt crypto lender Celsius Network, with fraud.

In a lawsuit filed before a supreme court in the County of New York on Thursday, James accused the former CEO of “defrauding hundreds of thousands of investors, including more than 26,000 New Yorkers, out of billions of dollars worth of cryptocurrency.”

“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,” James said in a statement.

Watch the recent FMLS22 session on cryptocurrency with participation from Dr Lisa Cameron, a Member of Parliament in the UK House of Commons.

New York Accuses Celsius of Leaving Investors in ‘Financial Ruin’

Additionally, the New York Attorney General accused Mashinsky of mispresenting and hiding Celsius’ worsening financial conditions from its investors even as it was losing “hundreds of millions of dollars of assets in risky investments.” She added that Mashinksy had left many investors in "financial ruin” as a result.

In her filing before the court, the Chief Law Officer asked the court to permanently bar Mashinsky from dealing in any business relating to the issuance, offer or sale of securities or commodities in New York. Moreover, James wants the court to stop the ex-Celsius CEO from serving as a Director or officer or any New York-based firm.

In addition, the Attorney General asked the court to order Mashinksy to give up profits obtained from the failed crypto lender business as well as return investor funds with additional payment for damages.

The Collapse of Celsius Network

In July last year, Celsius Network filed for Chapter 11 bankruptcy before a New York court over a month after it paused withdrawals on its platform, citing volatile markets.

The crypto lender’s failure came in the aftermath of the Terra-LUNA collapse which saw the demise of Voyager Digital and Three Arrow Capital. The collapse of Celsius Network was followed by a barrage of investigations from US federal and state regulators.