NEW YORK : Alex Mashinsky, the founder and former chief of the now-bankrupt cryptocurrency lender Celsius Network, must face a lawsuit by New York Attorney General Letitia James accusing him of civil fraud, a Manhattan state court judge ruled on Friday.
Chan also said James could pursue some claims under the Martin Act, a powerful state securities law, and that the"earned interest accounts" that Celsius offered customers qualified as securities under state law. Mashinsky has separately pleaded not guilty to criminal fraud charges brought by the U.S. Justice Department tied to Celsius' demise. He also faces related civil lawsuits by the U.S. Securities and Exchange Commission, U.S. Commodity Futures Trading Commission and U.S. Federal Trade Commission.
Cryptocurrency lenders such as Hoboken, New Jersey-based Celsius grew rapidly as digital asset prices surged higher during the COVID-19 pandemic. The lenders promised easy loan access and high interest rates to depositors, and lent tokens to institutional investors, hoping to profit from the difference.