Alex Mashinsky hints Do Kwon and SBF caused Celsius bankruptcy

Celsius founder Alex Mashinsky has filed an entertaining motion to dismiss New York Attorney General (NYAG) Letitia James’ lawsuit. NYAG is suing Mashinsky for operating an unregistered securities and commodities broker-dealer and defrauding investors out of hundreds of millions of dollars. Over 26,300 New York residents used Celsius Network.

Mashinsky, in an emotionally-charged retort, clapped back against almost all of her claims, claiming NYAG “parrots misinformation” with “baseless conclusions.” Instead of accepting responsibility for one of the largest frauds in crypto history, Mashinsky asserts that “circumstances outside of his (and Celsius’s) control led to a liquidity squeeze that resulted in Celsius pausing withdrawals and filing for bankruptcy.”

NYAG alleges Mashinsky misrepresented Celsius Network’s financial health and downplayed its exposure to FTX and Do Kwon’s Terra LUNA. NYAG’s case cites Mashinsky’s positive statements about Celsius’ ostensibly prudent, low-risk approach to finance. 

In reality, independent examiner Shoba Pillay detailed Celsius’ myriad similarities to a Ponzi scheme in a 476-page report produced for the US Bankruptcy Court for the Southern District of New York.

Mashinsky claims Celsius Network collapsed due to circumstances beyond his control. Celsius had invested heavily in projects by Do Kwon and Sam Bankman-Fried which, according to Mashinsky’s motion to dismiss, were impossible to identify as fraudulent prior to their collapse.

Terra USD (UST) experienced a spectacular meltdown in May 2022. It also used underhanded tactics such as depositing customers’ funds to Do Kwon’s Anchor Protocol, which the Terra USD meltdown wiped out.

Alex Mashinsky says Celsius was not a Ponzi scheme

Mashinsky’s motion to dismiss also claims the NYAG’s complaint parroted inaccurate information that had spread online and misrepresented its business model. He claims his descriptions of Celsius Network’s safety practices were mere “puffery,” and never meant to be taken seriously.

NYAG disagrees, citing the CEO’s statements as information on which a reasonable investor would rely when making an investment decision.

Read more: Celsius to sell crypto platform amid Mashinsky court battle

“Instead of acknowledging that Celsius’s eventual downfall was caused by a series of calamitous, external events, the NYAG pins all resulting losses on the alleged misstatements of Mashinsky,” he bemoaned.

Furthermore, Mashinsky says the NYAG failed to list any securities or commodities on the Celsius Network’s platform in her complaint. At least 40 state securities regulators investigated Celsius for violations. New Jersey and several additional state regulators have accused the company of offering unregistered securities.

Mashinsky also claims that Celsius Network was never subject to New York’s Martin Act, passed by legislators to deter fraud.

New York Attorney General Letitia James alleges that fraud played a major role in Celsius Network’s collapse. Founder Alex Mashinsky denies most responsibility. Overall, he claims he is a victim of circumstances beyond his control. He blames NYAG for taking his verbal statements out of context. Mashinsky has filed a motion to dismiss the lawsuit against him in Manhattan.

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