The former CEO of the insolvent crypto lender platform is charged by the New York State Attorney General for misleading hundreds of thousands of investors and breaking state securities laws.
The New York Attorney General’s Office, under the direction of NYAG Letitia James, has filed a lawsuit against Alex Mashinsky, the co-founder and former CEO of the cryptocurrency loan platform Celsius Network.
The former executive is accused of stealing billions of dollars’ worth of cryptocurrency from hundreds of thousands of investors, including more than 26,000 New Yorkers.
Alex Mashinsky claimed Celsius was more secure than a bank
The New York Attorney General brought up the fact that Mashinsky made claims on multiple occasions that Celsius was a more secure place than a bank as an illustration of the false and misleading representations he made.
NYAG said in a statement: “However, banks are highly regulated by state and federal government agencies and subject to regular and robust examinations, while Celsius was not subject to such regulatory requirements. Neither Celsius nor its customers had any hope of receiving the same protections as banks.”
As a result of the Celsius collapse, several individuals in New York suffered financial losses, including a resident who invested after mortgaging two properties, a disabled veteran who lost an investment of $36,000 that had taken him nearly a decade to save, and a disabled citizen who lost his entire investment of government assistance income, according to the complaint.
What are crypto lending platforms?
Cryptocurrency lending platforms offer customers the chance to borrow money using digital assets as collateral, in exchange for the opportunity to earn high interest rates on deposited funds. These rates can be significantly higher than what is offered by traditional savings accounts, but it is important to note that these products also carry a higher level of risk.
Crypto regulations in New York
New York has implemented some of the most stringent cryptocurrency exchange regulations in the United States, requiring companies wishing to engage in virtual currency transactions such as buying, selling, storing, or issuing to obtain a “BitLicense.” These companies must also adhere to customer verification and anti-money laundering regulations and are only allowed to trade a limited number of cryptocurrencies.
It is essential to carefully review the terms and conditions before investing with any lending platform. It is important to understand what will happen to your funds if the exchange experiences issues and is unable to continue its service. While the high interest rates offered by these platforms may be tempting, it is important to consider the potential risks to your money and whether it would be safer to deposit it in a traditional bank. Beware of offers that seem too good to be true, as they may be fraudulent.
Rickie Sanchez is an article writer specializing in cryptocurrency news. Since late 2017, he has been actively investing in cryptocurrencies. He is enthusiastic about everything that has to do with crypto and he hopes that the readers of his articles in the years to come will gain a massive understanding of blockchain technology.