Celsius CEO under fire as Committee of Creditors, DFPI implicate him News ▸ US ▸ Celsius ▸ Bankruptcy
Celsius CEO under fire as Committee of Creditors, DFPI implicate him
Celsius CEO Alex Mashinsky is accused of promoting false information about the safety of users' funds at the brink of the bankruptcy.
2 min read
Updated: Aug. 9, 2022 at 3:28 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
The Committee representing customers affected by Celsius’ bankruptcy has issued a mission statement as it seeks further investigation into CEO Alex Mashinsky for allegedly misleading the public.
Unsecured creditors of Celsius on July 27, formed a group that is represented by five individuals and two entities including Covario AG, a Zug-based crypto prime brokerage, to fight for the speedy recovery of their funds.
The Committee in its statement accused Celsius CEO Alex Mashinsky of allegedly promoting misleading information before the bankruptcy declaration. Mashinsky, through his public videos and messages, was reportedly promising customers that their funds were safe.
All funds are safe. We continue to be open for business as usual
As part of our responsibility to serve our community, @CelsiusNetwork implemented and abides by robust risk management frameworks to ensure the safety and security of assets on our platform.
— Alex Mashinsky (@Mashinsky) May 11, 2022
However, his claims proved false on June 12, when Celsius paused all withdrawals citing “extreme market conditions”. It went on to file a Chapter 11 bankruptcy one month later.
The committee has appointed international law firm White & Case as its counsel and engaged restructuring advisors M3 Partners, Perella Weinberg Partners, and Blockchain analytics unit Elementis to help in the ongoing investigation.
According to the statement:
“The Committee is prepared to work day and night to protect the rights of its constituents who have been harmed by Celsius’ improvident decisions and is up to the task before it,”
DFPI comes after Celsius’ “Earn Program”
The Department of Financial Protection and Innovation (DFPI) on August 8, issued a “cease and desist” order to Celsius for allegedly offering crypto interest accounts to customers without due registration.
Celsius and its CEO Alex Mashinsky are accused of providing misleading information about the risks associated with making deposits in the interest-bearing “Earn Program”. The DFPI also accused Celsius of failing to explain that in the case of sudden requests for withdrawals that it may not meet all customer’s demands when due.
According to the DFPI, the Earn Rewards accounts offered and sold by Celsius are securities in the form of investment contracts and should be registered with securities laws.
The DFPI has opened a public complaint form to receive feedback from customers impacted by Celsius’ withdrawal freeze, as it seeks to accelerate the investigation.
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Christian Nwobodo
Christian is a crypto-curious nerd who loves to investigate how protocols work under the hood. Christian is interested in DeFi protocol research, token economics, and on-chain analytics.
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Celsius Network
Celsius Network is a bankrupt cryptocurrency lending company that was founded in 2017 and headquartered in Hoboken, New Jersey.
Alex Mashinsky, born in 1965 in the Soviet Union to a Jewish family, moved to Israel in the 1970s.