Crackdowns continue on crypto companies following arrest of Sam Bankman-Fried and FTX disaster
By jdheyes // 2023-01-06
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What many see as a long-awaited crackdown on cryptocurrency companies and exchanges finally appears to be in full swing after the arrest of former FTX CEO Sam Bankman-Fried and the mega-billion-dollar collapse of his company, allegedly thanks to massive fraud and theft of investor funds. On Thursday, New York Attorney General Letitia James became the latest official to file suit, this time against Alex Mashingsky, after alleging that the co-founder of now-bankrupt crypto-lender Celcius Network LLC defrauded investors of billions of dollars worth of digital currency. As The Wall Street Journal reported: The lawsuit alleges that the former chief executive made false statements to investors about the soundness of Celsius’s financial condition then concealed its dire situation when the lender lost hundreds of millions of dollars in risky investments. Mr. Mashinsky falsely claimed that Celsius was safer than a bank and only lent assets to credible entities, the lawsuit said. The lawsuit accuses Mr. Mashinsky of violating the state’s Martin Act, a broad law used to combat securities and commodities fraud, and a state general business law that allows the attorney general to investigate fraud. "Alex Mashinsky lied to people about the risks of investing in Celsius, hid its deteriorating financial condition, and failed to register in New York. Mashinsky tricked hardworking people into investing their life savings into Celsius, promising big financial returns and claiming the platform was safer than a bank" said James, a Democrat. "Instead, Celsius collapsed and New Yorkers were left in financial ruin." “The law is clear that making false and unsubstantiated promises and misleading investors is illegal," she added. The only difference, so far, between Mashinsky and Bankman-Fried is that the former has not had any criminal charges filed against him -- yet. "A serial entrepreneur, Mr. Mashinsky launched Celsius in 2017, billing it as a safe and subversive alternative to traditional banks. Over five years, the company grew to be one of the largest crypto lenders, managing more than $20 billion in assets at its peak," the WSJ reported. "The company filed for bankruptcy protection in July as the crypto market spiraled and after freezing customer withdrawals. Mr. Mashinsky resigned as Celsius’s CEO in September." It gets worse for investors in Celsius, however. Earlier this week, a bankruptcy judge ruled that $4.2 billion in crypto deposits in the company's interest-bearing accounts belong not to the investors but the firm itself, which dealt a blow to thousands of investor customers who had been fighting to get their money back. "Celsius also revealed in a bankruptcy filing in October that it had received a federal grand jury subpoena in June. Customers have filed a proposed class-action suit against Celsius and Mr. Mashinsky, accusing the company of operating like a Ponzi scheme," the outlet reported. It should be obvious by now that crypto, for all its initial promise as an alternative currency free from the control and reach of governments, is doomed to fail because the industry has been flooded with frauds, charlatans, and hacks who are only interested in making billions without having to actually earn them. Sources include: ZeroHedge.com WSJ.com
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