The Celsius Network provided a major storyline for the crypto world through 2022. When the crypto market saw the first crash of its ongoing crypto winter, the American crypto lending company was one of the first dominoes to fall. Since then, the company has been embroiled in a legal mess, and its clients have been vocally enraged by their inability to repossess their assets. These clients are suffering further losses this week in the bankruptcy court. Meanwhile, though, Celsius’ former CEO is being targeted by New York’s Attorney General.
Even before its Chapter 11 bankruptcy filing, Celsius has been throwing Hail Marys to dig itself out of debt. The first action it took — one which is still in effect and has sparked the ire of its customers — was freezing withdrawals from the platform. Since filing for Chapter 11 protections, it decided to throw millions of dollars more into its crypto mining operations. However, this attempt to mine its way out of debt has been complicated. Just yesterday, a partner in this venture announced that it would be shutting down 37,000 Celsius mining rigs.
The company is securing some wins of its own in recent days, though, much to the chagrin of the thousands of clients with frozen assets. A federal judge ruled on Wednesday that assets under Celsius’ Earn product belong to the company and not the clients who staked them. Judge Martin Glenn argues that traders lost ownership over these assets when turning them over to the network. The move has been controversial, throwing flames on the argument over whether the company’s terms of service were too ambiguous. While clients will be unlikely to recover their assets at all now under the ruling, they will at least be able to enjoy some schadenfreude today via Celsius’ ex-CEO.
Celsius Network ex-CEO Targeted in NY Attorney General Suit
Celsius’ bankruptcy has thrusted is ex-CEO, Alex Mashinsky, into the spotlight. Mashinsky had been the face of the company. As such, he became the enemy to those clients with their assets frozen. Mashinsky is no longer in this role, so he cannot enjoy the company’s win from Glenn’s decision. However, he has not escaped responsibility for the role he played in locking off investors’ access to funds.
New York’s Attorney General, Letitia James, is filing a lawsuit filed against Mashinsky. In a social media post announcing the filing, James says the complaint accuses Mashinsky of defrauding investors. James goes on to say the former executive lied about the risks of using the network and was not transparent regarding the health of the company. She adds that Celsius, a New Jersey-based company, failed to register in New York.
Mashinsky has taken a great amount of heat since the company’s bankruptcy. Certainly, this controversy had helped push the executive to resign in September. Clients with assets stuck in the freeze have been demanding Mashinsky provide greater transparency on internal matters. Some, like Tiffany Fong, have risen to prominence for discussing their experiences communicating with the company. Fong has also stirred up conversation by leaking internal Celsius communications given to her by former employees.
The New York state government is also no stranger to crypto litigation. James had previously banned Bitfinex from operating its trading platform in the state. She has also taken on stablecoin operator Tether (USDT-USD), banning the trading of USDT in New York and asserting the project had not properly disclosed the makeup of its reserves.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
