The crypto lender Celsius filed for bankruptcy in early July, and creditors were hopeful that they would receive their funds back. However, the over half a million people that deposited money on Celsius might never get their money back after the judge involved in the bankruptcy proceeding said that the deposited funds belong to Celsius and not the depositors.
Judge says customer deposits to Celsius belong to the crypto lender
The recent ruling comes amid the lack of regulatory clarity in the growing cryptocurrency industry. Celsius was among the first crypto firms to fold amid the biting crypto winter caused by plunging digital asset prices. The lender filed for bankruptcy in July last year after halting withdrawals.
New York AG files a lawsuit against Celsius
The recent ruling comes from a civil lawsuit filed against the co-founder of Celsius, Alex Mashinsky, by the New York Attorney General, Letitia James. The New York Ag accused Mashinsky of defrauding investors.
The lawsuit has also said that Mashinsky used “false and misleading representations to induce [customers] to deposit billions in digital assets” to the platform. The lawsuit wants Mashinsky to pay for damages and have him banned from founding any financial or other businesses in New York.
Celsius promised high-interest rates to investors to lure them into depositing funds to the platform. The lender offered interest rates of as high as 20%, which drove many people who did not know about crypto to deposit funds to the platform.
The New York AG also said that Mashinsky engaged in aggressive marketing strategies by appearing in interviews, blog posts, and livestreams. It adds that Mashinsky promised investors that the platform was a safe alternative to banks. However, he failed to disclose that Celsius engaged in risky investments.
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