Celsius creditors accuse company’s management of fraud
2023.02.15 09:54
Celsius creditors accuse company’s management of fraud
By Tiffany Smith
Budrigannews.com – The official creditors’ committee of Celsius is considering filing a lawsuit against Celsius co-founder Alex Mashinsky and other executives for “fraud, recklessness, gross mismanagement, and self-interested conduct” that resulted in the crypto lender’s demise.
The Official Committee of Unsecured Creditors’ attorneys stated in a proposed complaint that was filed in a New York Bankruptcy Court on February 14 that the move came as a result of six months of investigations into Celsius’s current and former directors, officers, and employees.
The U.S. Trustee appointed the committee, which consists of seven Celsius account holders, in July 2022. Along with unsecured creditors, the committee represents the interests of Celsius’ account holders.
1-As part of its investigation, the UCC discovered significant claims and causes of action brought by Celsius against Alex Mashinsky and other insiders for breaching their fiduciary responsibilities, making fraudulent transfers, and other causes of action.
In a letter, lawyers from White & Case LLC wrote, “The Committee’s investigation has uncovered significant claims and causes of action based on fraud, recklessness, gross mismanagement, and self-interested conduct by the Debtors’ former directors and officers.”
The proposed lawsuit aims to bring claims and causes of action against the following Celsius executives, individuals, and associated entities, seeking damages in an amount that must be proven at trial:
- Alex Mashinsky, co-founder, director and former CEO
- Daniel Leon, co-founder, director and former CSO and COO
- Hanoch “Nuke Goldstein, co-founder and CTO
- Harumi Urata-Thompson, former CFO and CIO
- Jeremie Beaudry, former General Counsel and CCO
- Johannes Treutler, former head of Celsius’ trading desk and person in charge of purchasing CEL tokens on behalf of Celsius
- Aliza Landes, the former VP of Lending of Celsius and spouse of Daniel Leon
- Kristine Mashinsky, the spouse of Alex Mashinsky
The attorneys added, “Mr. Mashinsky, Mr. Leon, Mr. Goldstein, Mr. Beaudry, Ms. Urata-Thompson, and Mr. Treutler breached their fiduciary obligations to Celsius.”
“Those parties were aware Celsius was promising its customer interest payments it could not afford and did nothing to fix the problem,” the statement reads.
Additionally, Celsius lost $1 billion in a single year due to the executives’ “negligent, reckless (and sometimes self-interested) investments,” as well as another quarter of a billion dollars due to mismanagement “because they could not adequately account for the company’s assets and liabilities,” according to the lawyers.
They claimed that “they did not invest in or develop the company’s systems to adequately fix the issue after that loss, resulting in further losses.”
In addition, the motion asserts that Celsius’s executives were instructed to spend “hundreds of millions of dollars” on public markets to raise the price of CEL tokens while “secretly selling tens of millions of CEL tokens (or were aware of such sales)” for their own gain.
They watched in silence as Mr. Mashinsky risked hundreds of millions of dollars on the cryptocurrency market’s movement. They covered up the numerous lies that Mr. Mashinsky told about Celsius’s investments and financial situation.”
“The Prospective Defendants withdrew assets from the sinking ship […] while actively encouraging customers to keep their assets on the Celsius platform,” the lawyers added. “Finally, when it became apparent that Celsius would be required to file for bankruptcy, the Prospective Defendants withdrew assets from the sinking ship.”
The proposed complaint, according to the Celsius creditors committee, is only the “first of many steps” in its investigation into potential wrongdoings by former Celsius executives and the return of victims’ assets.
5-As always, the goal of the UCC is to get as much money back to Celsius’s customers and unsecured creditors who were hurt by Mr. Mashinsky and others’ carelessness, fraud, and recklessness.
On March 8, 2023, a hearing regarding the proposed complaint will take place.
