New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, co-founder of the now-bankrupt cryptocurrency lender Celcius Network LLC, alleging that he defrauded investors of billions of dollars worth of digital currency.

The lawsuit accuses Mashinsky of violating the state’s Martin Act, which is used to combat securities and commodities fraud, and of violating a state general business law that allows the attorney general to investigate fraud. According to the lawsuit, Mashinsky made false statements to investors about the financial stability of Celsius, claiming that it was safer than a bank and only lent assets to credible entities while concealing the company’s deteriorating financial condition and losses from risky investments.

James stated that Mashinsky “tricked hardworking people into investing their life savings into Celsius, promising big financial returns and claiming the platform was safer than a bank”, leading to the financial ruin of many New Yorkers.

The collapse of cryptocurrency company FTX and the arrest of its CEO, Sam Bankman-Fried, have led to a crackdown on cryptocurrency firms and exchanges.

New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, co-founder of the now-bankrupt cryptocurrency lender Celcius Network LLC, accusing him of defrauding investors of billions of dollars worth of digital currency. Mashinsky has not yet faced criminal charges.

Celsius, which was once one of the largest crypto lenders managing over $20 billion in assets, filed for bankruptcy in July and Mashinsky resigned as CEO in September. A bankruptcy judge recently ruled that $4.2 billion in crypto deposits in the company’s interest-bearing accounts belong to the firm rather than the investors. Customers have also accused Celsius and Mashinsky of operating like a Ponzi scheme in a proposed class-action lawsuit.

The crypto industry has been plagued by fraud, deception, and hacks, leading to the belief that cryptocurrencies are doomed to fail.

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