• New York Attorney General Letitia James sued the founder back in January.
• James might pursue certain claims under the Martin Act, a strong state securities statute.

A judge in Manhattan state court determined on Friday that New York Attorney General Letitia James may proceed with her civil fraud lawsuit against Alex Mashinsky, the founder and former CEO of the defunct crypto lender Celsius Network.

James sued Mashinsky in January before the former CEO of insolvent crypto lender Celsius was indicted on federal charges. Justice Margaret Chan ruled that the allegations were adequate indicating Mashinsky committed fraud by falsely representing Celsius as a secure banking option while hiding its hazards, which amounted to hundreds of millions of dollars.

Pursued by Several Authorities

According to Chan, the “earned interest accounts” that Celsius provided its clients were securities under state law, and James might pursue certain claims under the Martin Act, a strong state securities statute.

The judge stated in a 25-page decision:

The attorney general’s lawsuit “supports a reasonable inference that the harm suffered by investors flowed, at least in part, from Mashinsky’s alleged misrepresentations made in New York concerning Celsius’ overall financial health and investment safety.”

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On the other hand, Mashinsky has denied wrongdoing in connection with criminal fraud accusations filed against him by the United States Department of Justice. The United States Federal Trade Commission, the United States CFTC, and the United States SEC have all filed separate but connected civil actions against him.

During the COVID-19 epidemic, crypto lending platforms like Celsius saw significant expansion as digital asset values rose. The firms hoped to make a profit by promising depositors fast access to loans at high-interest rates while lending tokens to institutional investors.

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