It has been proposed by the official committee of Celsius creditors that a lawsuit be filed against the company’s co-founder Alex Mashinsky and other executives for “fraud, recklessness, gross mismanagement, and self-interested conduct,” all of which contributed to the ultimate failure of the cryptocurrency lender.
Attorneys for the Official Committee of Unsecured Creditors said in a proposed complaint that was submitted to a New York Bankruptcy Court on February 14 that the action comes after six months of inquiries into Celsius’ current and past directors, officials, and employees.
The U.S. Trustee selected seven Celsius account holders to serve on the committee this past July. The group was established by the U.S. Trustee. Along with the interests of unsecured creditors, the committee acts as a representative for those who possess Celsius accounts.
According to documents written by attorneys from White & Case LLC, “The Committee’s inquiry has discovered substantial claims and causes of action based on fraud, negligence, gross mismanagement, and self-interested behavior by the Debtors’ former directors and officers.”
The planned legal action intends to file claims and causes of action against the following Celsius executives, people, and businesses that are affiliated with them:
The attorneys wrote in their letter that “Mr. Mashinsky, Mr. Leon, Mr. Goldstein, Mr. Beaudry, Ms. Urata-Thompson, and Mr. Treutler breached their fiduciary obligations to Celsius.” They went on to say that “those parties were aware Celsius was promising its customer’s interest payments that it could not afford and did nothing to fix the problem.”
The lawyers have also alleged that the executives made “negligent, reckless investments” that caused Celsius to lose $1 billion in a single year, while mismanagement led to another quarter-billion dollar loss “because they could not adequately account for the company’s assets and liabilities.” This loss was attributed to the fact that the executives “could not adequately account for the company’s assets and liabilities.”
According to the allegations made by the plaintiffs, “after that loss, they did not invest in or enhance the company’s systems to appropriately solve the problem, which resulted in subsequent losses.”
The motion also alleges that the executives of Celsius directed the company to spend “hundreds of millions of dollars” on public markets to artificially inflate the price of CEL tokens, while at the same time the executives “secretly sold tens of millions of CEL tokens” for their own benefit.“
They did nothing except observe as Mr. Mashinsky carelessly gambled hundreds of millions of dollars on how the cryptocurrency market would move as they did so. They covered up Mr. Mashinsky’s persistently dishonest statements on Celsius’ investments and financial situation.
The attorneys continued by saying that “finally, when it became apparent that Celsius would be required to file for bankruptcy, the Prospective Defendants withdrew assets from the sinking ship while actively encouraging customers to keep their assets on the Celsius platform,” the prospective defendants did this.
The creditors committee of Celsius said that the planned lawsuit was just the “first of many stages” in their inquiry into suspected wrongdoings committed by former Celsius executives and the restitution of assets to victims.
On March 8, there will be a hearing on the planned complaint that was submitted.