The ruling highlights the Wild West nature of the unregulated cryptocurrency industry. On Thursday, New York Attorney General Letitia James made a move to have some sort of order, or at least legal repercussions, against Celsius founder Alex Mashinski, who has filed a lawsuit against him for defrauding hundreds of thousands of consumers. showed
Celsius became the first major cryptocurrency platform to implode last year, with bankruptcy in July freezing at least $4.2 billion for 600,000 Americans and FTX’s collapse four months later, according to court documents. The fortunes of cryptocurrencies have taken a nosedive in recent months since it portended the
“There are many other platforms out there that feature terms of service similar to Celsius,” says Aaron Kaplan, an attorney at financial-focused Gusrae Kaplan Nusbaum and co-founder of his own crypto firm. I was. Clients need to “understand the risks they take on depositing their assets on poorly regulated platforms,” he said.
James’ lawsuit, on the other hand, alleges that Mashinski “uses false and misleading statements to induce.” [customers] Billions of dollars are deposited in digital assets.” The lawsuit seeks unspecified damages from Mashinski and wants to bar him from various financial and other jobs in New York.
A spokesperson for Celsius, Luke Wolff, said Mashinski was no longer involved in running the company. Mashinsky didn’t respond to a request for comment.
For years, Celsius has promised exorbitant interest rates of around 20% to people in a sort of fantasy version of a real-world bank, allowing many people with no interest in cryptocurrencies to enter the market.
Mashinski was the reason, according to the complaint. “In hundreds of interviews, blog posts, and livestreams, Mashinski touted Celsius as a safe alternative to banks while hiding that it was actually involved in risky investment strategies. “
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Masinski was known for his regular online “Ask Mashinski anything” Q&A and T-shirts with messages like “Banks are not your friend”. Crowds of fans on YouTube and his Twitter celebrated the cult of “The Machine” he’s nicknamed. If FTX’s Sam Bankman-Fried was the public face of cryptocurrency in the halls of Washington, Mashinsky was often the most visible symbol to ordinary investors.
The lawsuit portrays a man trying to market himself as an unbanked, working-class hero who, in fact, put a lot of these people’s money into very risky investments. was used.
“Calling himself and his company a modern-day Robin Hood, Mashinski boasted that Celsius would ‘… benefit people he could never have done on his own’.” [and] We take it from the rich,” Suit said. “These promises were false.”
But there may be limits to what the legal system can do if cryptocurrency companies are knowledgeable enough to protect themselves, according to the bankruptcy court. states say the wording was at least “vague” about the rights given to Celsius. But Glenn disagreed.
Lawyers for Celsius’ Joshua Sussberg and Patrick J. Nash Jr., and lawyers for creditors Gregory Peche and Andrea Amric, did not respond to requests for comment.
The bankruptcy ruling specifically focused on whether Celsius could sell $18 million in so-called stablecoins, a type of cryptocurrency, to maintain its solvency as part of its restructuring. But its impact is much greater. By ruling that the money in the account was not actually owned by the 600,000 account holders, the court basically said they were now unsecured creditors. And “it’s not worth it enough to pay it back,” writes Glenn.
Its impact goes beyond that and could affect other cryptocurrency platforms that are fine print and harshly worded, causing problems for customers if they collapse.
Bryan Marks, who teaches economics and business law at the University of New Haven’s Pompeian College of Commerce and has studied the Celsius case, said, “This is a new take on how difficult it is to trade in the wildlands of cryptocurrencies. It just raises questions,” he said. “I wouldn’t be surprised to see other companies revisit their contract terms after this.”
The connections between cryptocurrency companies are vast, and one company’s failure can spill over into another months later. On Thursday, crypto lender Genesis announced it was laying off 30% of his staff as a result of FTX sister company Alameda funding his research.
Celsius creditors are also affected by FTX’s bankruptcy. Mashinski’s former firm, revealed in the New York lawsuit, lent Alameda $1 billion against FTX’s token, FTT.
“Since then, the value of FTT has plummeted by about 95%,” he said, adding that “Celsius holds almost worthless collateral.”