SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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THE PEOPLE OF THE STATE OF NEW YORK
By
LETITIA JAMES, Attorney General of the State of
New York,
Plaintiff,
-against-
ALEX
MASHINSKY,
Defendant.
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Index No.:
COMPLAINT
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Plaintiff, the People of the State of New York, by Letitia James, Attorney General of the
State of New York (“OAG” or “Plaintiff”), alleges as follows:
PRELIMINARY STATEMENT
1. Between 2018 and at least June 2022, Defendant Alex Mashinsky (“Mashinsky”
or “Defendant”) engaged in a scheme to defraud hundreds of thousands of investors, including
more than 26,000 New Yorkers, by using false and misleading representations to induce them to
deposit billions of dollars in digital assets with his cryptocurrency lending company Celsius
Network LLC (together with its parent and related entities, “Celsius”), which he founded and led
as chief executive officer. Mashinsky promoted Celsius as a safe alternative to banks while
concealing that Celsius was actually engaged in risky investment strategies.
2. Mashinsky was the public face of Celsius. In hundreds of interviews, blog posts,
and livestreams, Mashinsky promised investors high yield with minimal risk, assuring them that
their digital assets would be as safe as money in a bank and that Celsius would always act in
investors’ best interest. Touting himself and his company as a modern-day Robin Hood,
Mashinsky boasted that Celsius “deliver[s] yield…to the people who would never be able to do it
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This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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themselves, [and] we take it from the rich….” Mashinsky promised investors some of the
highest yields in the industry, as high as 17%. He told investors that Celsius would generate
sustainably high returns by making low-risk collateralized loans to first-tier institutions and
cryptocurrency exchanges as well as overcollateralized loans to retail borrowers.
3. These promises were false – but proved wildly popular. By early 2022,
Mashinsky’s promotional efforts had helped Celsius amass $20 billion in digital assets from
investors all over the world. But as Celsius grew larger, it struggled to generate enough revenue
to pay the promised yields on investors’ deposits. In search of revenue, Celsius moved into
significantly riskier investments, extending hundreds of millions of dollars in uncollateralized
loans, and investing hundreds of millions of dollars in unregulated decentralized finance
platforms.
4. When Celsius suffered losses on risky investments, Mashinsky failed to disclose
these losses to investors. Instead, he continued to promise and pay high yields to attract new
deposits and to tell investors to keep their cryptocurrency with Celsius which, he continued to
promise, would invest it safely and pay better returns than the banks. In one video Mashinsky
claimed that: “All you need to do to become a millionaire… is to HODL,” using a popular
industry term that originated as a misspelling of the word “hold” and has come to mean “hold on
for dear life.” The term is often used to discourage investors from selling (or, in the case of
Celsius, withdrawing their cryptocurrency from the platform) during market declines or
volatility.
5. But as cryptocurrency markets plummeted in the spring of 2022, Celsius’s
unsustainable business model began to unravel. By May 2022, Celsius’s liabilities exceeded its
diminishing assets by hundreds of millions of dollars, and investor withdrawals were
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NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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accelerating. Rather than disclose Celsius’s dire situation, Mashinsky doubled down. He
repeatedly and falsely assured investors that Celsius was stronger than ever, that investor assets
were safe at Celsius, and that Celsius had billions of dollars in liquidity to cover anyone who
wanted to withdraw their assets. In late May 2022, Mashinsky was still actively recruiting new
investors, urging them to disregard all criticism of Celsius from “naysayers and haters,” to
“ignore the FUD”
(a popular crypto term that stands for fear, uncertainty, and doubt), and
continued to encourage existing investors to HODL.
6. On June 12, 2022, Celsius froze customer withdrawals. A month later, on July
13, 2022, Celsius filed for bankruptcy, revealing that its liabilities exceeded its assets by more
than one billion dollars.
7. The collapse of Celsius left many individuals in a state of desperation and
financial ruin, which they described in letters to the bankruptcy court and the OAG. One New
York resident mortgaged two properties to invest with Celsius. A father of three lost his life
savings of more than $375,000. A disabled veteran lost his investment of $36,000, which had
taken him nearly a decade to save up. Another disabled citizen, who depended upon government
assistance to supplement his $8 per hour income, lost his entire investment and was left feeling
“humiliated and defeated.”
8. Many investors wrote that they were persuaded to invest in Celsius by
Mashinsky’s false promises that Celsius would keep their assets safe and generate high yields
through low-risk investments.
9. Mashinsky’s scheme to defraud, including his misrepresentations and omissions,
constitutes fraudulent practice in violation of New York General Business Law (“GBL”) Article
23-A, §§ 352 et seq. (the “Martin Act”), as well as repeated fraudulent or illegal acts or persistent
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which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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fraud or illegality in the carrying on, conducting or transacting of business in violation of New
York Executive Law § 63(12). Mashinsky also failed to register as a securities dealer and
salesperson and as a commodities broker-dealer and commodities salesperson in violation of the
registration provisions of the Martin Act, GBL § 359-e and attendant regulations.
10. This action seeks, inter alia, an order permanently enjoining Mashinsky from
engaging in fraudulent, deceptive, and illegal acts in violation of the Martin Act and Executive
Law; from engaging in any business relating to the issuance, advertisement, or sale of securities
or commodities in New York; from serving as director or officer of any company doing business
in New York; and directing Mashinsky to pay damages, restitution, and disgorgement.
PARTIES
11. Plaintiff Letitia James, the Attorney General of the State of New York, is
authorized to bring this action and to assert the causes of action set forth below in the name and
on behalf of the People of the State of New York pursuant to the Martin Act and Executive Law
§ 63(12).
12. The Martin Act authorizes the Attorney General to commence a civil action for
restitution, damages and other relief in connection with fraudulent practices in the issuance,
exchange, purchase, sale, promotion, negotiation, advertisement, investment advice, or
distribution of securities or commodities within or from New York State. Executive Law
§ 63(12) authorizes the Attorney General to seek restitution, damages, injunctive relief, and costs
when any person has engaged in repeated fraudulent or illegal acts or has otherwise
demonstrated persistent fraud or illegality in the carrying on, conducting, or transacting of
business.
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NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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13. Defendant Alex Mashinsky is a co-founder and the former Chief Executive
Officer (“CEO”) of Celsius Network LLC, a Delaware limited liability company with its
principal office in Hoboken, New Jersey. Mashinsky controls Celsius Network LLC through his
83.7% equity stake in Celsius Network Inc., a Delaware corporation, which is a majority
shareholder (65.32%) of Celsius Network Limited, which wholly owns Celsius US Holding
LLC, which is in turn the sole owner of Celsius Network LLC. All these entities are debtors in
the Celsius Network LLC bankruptcy proceedings in the Southern District of New York, Case
No. 22-10964 (MG). Mashinsky conducted business from and resides in New York, New York.
JURISDICTION AND VENUE
14. This Court has jurisdiction over the subject matter of this action, personal
jurisdiction over the Defendant, and authority to grant the relief requested pursuant to the Martin
Act and Executive Law § 63(12).
15. Pursuant to C.P.L.R. § 503, venue is proper in New York County because the
OAG’s office is located in this county, Defendant resides in this county, and a substantial part of
the conduct giving rise to the claims occurred in this county.
FACTUAL ALLEGATIONS
I. General Background on Celsius and Mashinsky’s Role as Promoter and CEO of
Celsius
16. Mashinsky launched Celsius in March 2017 in order to “radically disrupt a broken
system…to help everyday people all around the world attain their financial dreams” and engage
in the cryptocurrency “revolution.”
Cryptocurrencies or virtual currencies, such as Bitcoin and
Ether, are digital assets that reside on an electronic ledger, called a blockchain. Digital assets are
commodities under the Martin Act.
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NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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17. Celsius claimed it was different from traditional financial institutions because it
was “democratized” and “[b]uilt on the belief that financial services should only do what is in the
best interests of the community.” A page on Celsius’s website titled “Why Trust Celsius”
claimed that a “critical part” of the company’s mission was to “provide fair and transparent
services.”
18. As CEO and majority owner of Celsius Network LLC, Mashinsky had access to
and control over Celsius’s overall operations and corporate strategy. He was familiar with the
day-to-day operations, business and financial affairs, and books and records of Celsius.
A. Celsius’s Products and Services
19. Celsius offered its customers a variety of cryptocurrency-related products and
services, which were accessible through Celsius’s website and mobile application (“app”). To
create a Celsius account, investors digitally signed Celsius’s user agreement and acknowledged
its terms of use.
20. Investors could then transfer cryptocurrency from their own digital wallet into
their Celsius account, purchase cryptocurrency through the Celsius app using dollars, or purchase
cryptocurrency through Celsius using other cryptocurrencies. After investors transferred
cryptocurrency to Celsius, they could earn interest on that cryptocurrency or use it as collateral to
borrow against.
21. Celsius’s flagship product was the “Earn” program, which allowed investors to
earn interest on cryptocurrency deposited into an earned interest account (“EIA”) at Celsius.
Celsius promoted EIAs by advertising some of the highest yields in the market, up to 17% per
year. Mashinsky explained that the rates were “subject to change on a weekly basis as they are
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NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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calculated by the weekly demand for each coin combined with our promise that up to 80% of our
profits are returned to the depositors.”
22. EIA investors transferred their cryptocurrency to Celsius, which then pooled the
deposited digital assets and invested them in various revenue-generating activities. Celsius had
full control over its use of EIA assets, while investors had no discretion or control over Celsius’s
investment decisions. EIAs constituted securities under the Martin Act.
23. Mashinsky described the EIA model as “sleep to earn,” where investors merely
deposited their virtual currencies and let Celsius do all the work to generate returns. As
Mashinsky put it, “you don’t have to do anything, you just go to sleep, and every Monday we
pay you yield.”
24. At least 26,390 New York residents registered as users with Celsius and more
than 4,000 of those investors enrolled in EIAs. As of December 31, 2021, New Yorkers had
deposited a total of approximately $440 million on the Celsius platform.
B. Mashinsky Promoted Celsius and Solicited Investors
25. Mashinsky was Celsius’s primary promoter and spokesman, appearing regularly
in interviews, at cryptocurrency conferences, and on social media, including Twitter and
YouTube. Many of Mashinsky’s YouTube and other interviews were and are accessible directly
from the Celsius website. From 2018 through June 2022, Mashinsky promoted Celsius during
his weekly “Ask Mashinsky Anything” videos (“AMAs”), which he broadcast on Fridays, often
from his New York City apartment, the self-described “Crypto Castle.” Investors used a chat
function to submit questions and comments, which Mashinsky would answer live.
26. By June 2022, Mashinsky had recorded 179 AMA episodes, most of which were
about an hour long, and each of which was seen by thousands of viewers. Many of the AMAs
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This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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were posted on Celsius’s website, as well as on YouTube, and were accessible at least until June
12, 2022, when Celsius froze investor accounts.
27. The videos often contained a picture and descriptions similar to the below:
28. From 2018 through at least 2020, the online descriptions of Mashinsky’s videos
included his promise “to act in the best interest” of investors.
29. AMAs were accompanied by a solicitation to invest with Celsius and included
links that would take viewers directly from Mashinsky’s video to Celsius’s website and Celsius’s
app.
30. Mashinsky cast himself as a visionary and developed a loyal following. Many of
his slogans, such as “unbank the banked and bank the unbanked” and “banks are not your
friends,” were well-known throughout the cryptocurrency community. He often wore t-shirts
branded with these slogans during his AMAs videos and in other public appearances.
31. Mashinsky lured investors to Celsius by promising that Celsius would keep their
cryptocurrency assets safe and would pay outsized yields by using those assets to make low-risk
loans. When critics claimed that it was impossible to generate the high returns Celsius promised
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NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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investors without taking “tremendous” risks with investors’ assets, Mashinsky continued to
falsely insist that investing with Celsius was safe. Mashinsky dismissed the criticism that
Celsius was taking risks with investors’ digital assets, asking his followers to ignore the “FUD”
(fear, uncertainty, and doubt) and to unfollow critics on Twitter.
II. Mashinsky Misrepresented that Investor Assets at Celsius Were as Safe as Money in
a Bank
32. Mashinsky drew investors to the Celsius platform by repeatedly and misleadingly
stating that digital assets deposited with Celsius were as safe as – or even safer than – money
deposited in a traditional bank.
33. In a March 7, 2019, interview at the NASDAQ MarketSite in Times Square,
Mashinsky claimed that money deposited with Celsius was “as safe as it is with the bank, which
is the alternative, it’s just that [Celsius] network is always acting in your best interest.” In a
December 3, 2020, YouTube interview, Mashinsky stated that Celsius generated revenue by
lending assets in a way “similar to what banks do.” On August 2, 2021, Mashinsky represented
that Celsius was in fact safer than a bank, claiming in a YouTube interview that “we have less
risk, we have much less risk [than banks].”
34. Mashinsky’s repeated statements presenting Celsius as safe as or safer than a bank
were materially false and misleading. Banks are highly regulated by state and federal
government agencies and undergo regular examinations. They are subject to capital
requirements and are regularly tested for safety and soundness. State and federal regulators have
robust systems in place to ensure orderly liquidations of failing institutions that minimize
disruptions to customer services and limit customer losses. Many banks may access the Federal
Reserve System for discounted liquidity to prevent potential failures. Bank customers are also
protected by the Federal Deposit Insurance Corporation, which provides deposit insurance for
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NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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individual accounts up to $250,000 as protection from losses due to bank failure. Because
Celsius was not a bank, neither Celsius nor its customers had any hope of availing themselves of
any of these protections when Celsius in fact failed.
35. Mashinsky also compared Celsius’s lending of investor cryptocurrency to
securities lending by securities broker-dealers, such as Schwab, Fidelity, Blackrock, or State
Street. For example, on April 26, 2021, in a YouTube interview, Mashinsky stated that “the only
difference between [securities] lending… and Celsius, which is digital asset lending, is that
Celsius gives 80% of that to the depositor, to the user….”
36. But that was not the only difference. Broker-dealers, like banks, are subject to
regulatory scrutiny. They generally must be members of the Financial Industry Regulatory
Authority and must be registered either with the United States Securities and Exchange
Commission or with a state securities regulator. Celsius was not registered with any of these
entities as a broker-dealer. Furthermore, assets held with broker-dealers benefit from insurance
provided by the Securities Investor Protection Corporation, which covers investors for up to
$500,000 in securities and up to $250,000 in uninvested cash against losses due to a broker-
dealer’s insolvency. In stark contrast, Celsius’s investor deposits were not covered by any
insurance.
37. Mashinsky further misled investors by promising that Celsius would take full
responsibility for safeguarding investor assets, including from any shortfalls or loss of value
caused by Celsius’s use or “deployment” of investors’ cryptocurrency assets. In his December
10, 2021, AMA, Mashinsky declared that “Celsius takes full responsibility if anything goes bad”
and claimed that if “something bad happens with the Celsius deployment … Celsius [is] standing
behind it.” At the same time, Mashinsky frightened investors into staying with Celsius by stating
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which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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that competitors’ platforms could not be relied upon “when they … blow up… or when they
don’t perform or they don’t deliver….” In the end, however, it was Celsius that fell quickly and
neither performed nor delivered on its promises.
III. Mashinsky Misled Investors About the Number of Active Users of Celsius
38. Both Mashinsky’s scheme and Celsius’s sustainability depended on wide public
acceptance of Celsius’s business model and the willingness of investors to entrust their digital
assets to Celsius. In a blog post on March 12, 2019, Mashinsky explained: “The more people
that deposit, the more profits there are to distribute to the community, and THAT is a sustainable
and scalable promise.”
To increase assets available for investment and for liquidity, Celsius
needed a continuous supply of new investors and new deposits. And the more losses Celsius
sustained through risky investment of existing deposits, the more it needed the new deposits to
plug holes in its balance sheet.
39. Mashinsky often exaggerated the number of Celsius’s investors, making Celsius
appear significantly more popular than it actually was. In a YouTube interview on November
17, 2021, for example, Mashinsky, stated “we have a million and a half customers…they hold
over 25 billion dollars’ worth of digital currencies….” In another YouTube interview on June 1,
2022, Mashinsky claimed: “we have a community of almost two million people….”
40. While Celsius had approximately 1.7 million registered users as of July 2022,
most were not active customers. In fact, from 2019 through 2022, roughly two-thirds of
registered U.S. Celsius users held less than one dollar’s worth of cryptocurrency in their Celsius
accounts. For example, by June 17, 2022, Celsius had 584,192 registered U.S. users; of those,
386,294 (66%) had an account balance of less than one dollar. Mashinsky’s claim of nearly two
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NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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million users was materially misleading because Celsius was not as widely accepted – or used –
as Mashinsky led his investors to believe.
IV. Mashinsky Lured Investors to Celsius by Misrepresenting How Investor Assets
Would be Deployed and Concealing the Risks of Those Deployments
41. Mashinsky solicited investors by promising to generate yield through low-risk
sustainable means, primarily by making collateralized loans to reputable institutions and
cryptocurrency exchanges and by making overcollateralized loans to retail investors. In a post
on Celsius’s website titled Celsius Network is Nothing Like BlockFi, dated March 12, 2019,
Mashinsky wrote that Celsius’s team is “hard at work acting in [investors’] best interest” and that
Celsius’s business model was “straightforward and transparent.” He outlined Celsius’s
investment strategy: “We lend our community’s assets to crypto exchanges and hedge funds
looking to borrow coins.”
42. In a YouTube interview on August 5, 2021, titled How Crypto Yields Work,
Mashinsky claimed that this strategy enabled Celsius to pay investors “almost 100 times more
than your bank pays you…and we do that without taking any risk…or taking minimal risk.” In a
December 10, 2021, AMA, Mashinsky yet again assured investors that Celsius “[doesn’t] do it
by taking risk…”
43. However, Celsius’s business model was unsustainable. As Celsius proved unable
to generate sufficient returns through safe loans and investments, it began to make
uncollateralized loans to institutional borrowers and engage in risky strategies on unregulated
decentralized finance protocols. In his July 14, 2022, sworn declaration filed in Celsius’s
bankruptcy proceeding, Mashinsky admitted that Celsius made “poor asset deployment
decisions” and that since at least 2021 Celsius’s business model needed significant changes,
including reducing the yields paid to investors. Mashinsky also knew, as Celsius outlined in a
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NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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presentation to a potential investor in June 2022, that Celsius’s trading business was “volatile,
risk based, capital intensive and unprofitable” and that Celsius needed to “de-risk the business”
by “reducing high risk DeFi, CeFi [centralized finance] and Institutional loans deployments.” As
alleged in more detail below, Celsius began to incur losses from its investing strategies at least as
early as February 2021, and through the rest of 2021 and into 2022. Yet Mashinsky continued to
falsely represent to investors that Celsius was generating high yield through low-risk investments
and that investors’ assets were safe at Celsius.
A. Mashinsky Falsely Claimed that Celsius Made No Uncollateralized Loans
44. Mashinsky repeatedly told investors that Celsius only made loans that were
collateralized. In a May 19, 2020, YouTube interview, for instance, Mashinsky stated that “we
are only doing asset-backed lending…. We only lend against collateral…without exception….
We have over one hundred percent collateral.” In a July 17, 2020, AMA, Mashinsky stated that
“Celsius does not do non-collateralized loans”
because “that would be taking too much risk on
[customers’] behalf.”
In his November 6, 2020, AMA, Mashinsky reiterated that “We do not
do…unsecured lending.”
45. Almost two years later, on April 13, 2022, in an interview with CNBC
International, Mashinsky was asked to respond to a report that Celsius was offering
uncollateralized loans that “could be incredibly risky.” Mashinsky still maintained that “we
don’t offer any non-collateralized loans.”
46. Non-collateralized loans are risky because if the borrower is unwilling or unable
to repay the loan, the lender has no collateral it can retain or liquidate to offset the loss on the
loan. Celsius’s own internal Risk Management Framework document, dated October 20, 2021,
recognized the “higher risk” of uncollateralized loans.
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This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
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47. Mashinsky’s statements that Celsius did not make non-collateralized loans were
materially false and misleading. Between 2020 and 2022 Celsius exponentially increased its
exposure to risky uncollateralized loans. In 2020, Celsius made almost $10 million in
uncollateralized loans. In 2021, that number ballooned to at least $203 million, and in the first
half of 2022, Celsius made at least $394 million in uncollateralized loans. From 2020 through
June 2022, Celsius made over 100 uncollateralized loans to at least 19 different counterparties.
B. Mashinsky Misrepresented the Risk and Extent of Celsius’s Exposure to
Decentralized Finance
48. Unable to generate sufficient returns through collateralized loans to retail and
institutional counterparties, Celsius turned to risky investments on decentralized finance
platforms to generate yield.
49. The phrase decentralized finance (“DeFi”) refers to financial services, like
cryptocurrency lending, that operate on a blockchain pursuant to certain predetermined rules
(“protocols” and “smart contracts”) without the involvement of an institutional intermediary such
as a bank or a broker. While transactions on DeFi are typically over-collateralized by
cryptocurrency, if the market value of the collateral falls below a certain threshold, the DeFi
protocol will automatically liquidate the collateral and close out the loan. In a down market,
such liquidations can result in significant loss of value for the borrower. Transactions on DeFi
are also risky because DeFi protocols are unregulated and vulnerable to hacking, manipulation,
and insolvency.
50. Celsius’s risk management unit identified all DeFi investments as high-risk
activity. Mashinsky personally acknowledged that DeFi posed risks, but assured investors,
including during a December 3, 2021, YouTube interview, that “Celsius… helps people navigate
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approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
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in a safe way into [the DeFi] environment… because Celsius already did the homework and
figured out what’s safe.”
51. Mashinsky’s statements about the safety of Celsius’s DeFi investments were
materially false and misleading because Celsius had not “figured out what’s safe.” In fact,
Celsius suffered numerous losses caused by known risks of DeFi. For example, in August 2020,
Mashinsky personally hired KeyFi Inc., for the purpose of handling Celsius’s DeFi investments.
KeyFi Inc. then engaged in high-risk leveraged trading strategies with more than $500 million
worth of Celsius’s investor assets. By February 2021, these investments resulted in losses of at
least tens of millions of dollars, including when a drop in the value of Celsius’s collateral on the
DeFi protocol Compound triggered automatic liquidation of this collateral.
52. Later that year, in June 2021, Celsius lost access to 35,000 Ether worth tens of
millions of dollars on a third-party service called StakeHound. Celsius never recovered those
assets. Mashinsky failed to disclose this loss when it occurred.
53. Subsequently, in December 2021, Celsius lost Bitcoin then valued at
approximately $50 million in a hack on the DeFi protocol BadgerDAO.
54. As Celsius’s losses on DeFi protocols mounted, Mashinsky told investors that
Celsius’s exposure to DeFi was minimal. In a June 1, 2022, YouTube interview, Mashinsky
stated: “Celsius continues to do what it did for the last five years. Again, most of our business, I
would say 90% of our business, has nothing to do with DeFi.”
55. This statement was false. By the spring of 2022, Celsius had engaged far more
than 10% of its assets in DeFi protocols; in fact, DeFi had grown into Celsius’s single largest
deployment category. Documents produced by Celsius indicate that as of May 25, 2022, Celsius
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approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
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had deployed nearly 30% of investors’ digital assets into DeFi activities, compared to only about
11% in retail lending and about 12% in institutional lending, as demonstrated in the chart below.
56. Celsius’s large investments in risky DeFi strategies and Celsius’s use of investor
cryptocurrency as collateral for borrowing hundreds of millions from DeFi protocols were
contrary to Mashinsky’s representations to investors that their assets were invested safely and
generated high yield at low risk.
C. Mashinsky Concealed Celsius’s Exposure to Risky Investment Strategies and
Institutions
57. Mashinsky was adamant that Celsius only lent assets to credible and reputable
counterparties and did so “without taking any risk…or taking minimal risk.” In his November 6,
2020, AMA, Mashinsky stated that Celsius “only lend[s] to the first-tier institutions, first tier
exchanges….” On April 13, 2022, Mashinsky falsely and misleadingly claimed that Celsius
dealt only with “very credible” institutional counterparties. Yet Celsius routinely exposed
investors’ assets to high-risk counterparties and strategies, and Celsius suffered multiple large
losses which Mashinsky concealed from investors, despite repeated promises of transparency.
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1. Celsius Lost Half a Billion Dollars of Investor Collateral
58. From October 2019 to February 2021, Celsius took out loans from Equities First
Holdings (“Equities First”) that were collateralized by investor cryptocurrency. According to
Mashinsky’s bankruptcy declaration, these loans were used to finance Celsius’s operations.
59. However, after repaying the loans to Equities First in July 2021, Celsius was
unable to get back its collateral worth approximately $500 million. This was a significant loss of
investor assets, which Mashinsky concealed at the time. As of June 23, 2022, Equities First
owed Celsius $441 million on an unsecured basis.
2. Celsius Lent to Risky Companies of Dubious Valuation
60. Celsius made risky loans that were collateralized by illiquid collateral of highly
speculative value in the form of proprietary tokens.
61. Between 2020 and 2022, under Mashinsky’s watch, Celsius made loans totaling
roughly a billion dollars to Alameda Research Ltd. (“Alameda”), a cryptocurrency trading firm
founded by the recently indicted Sam Bankman-Fried. A substantial portion of Alameda’s assets
were held in FTT, a proprietary crypto token created and issued by Alameda’s sister company
FTX Trading Ltd (“FTX”). FTX propped up the value of FTT by periodically re-purchasing
FTT from the market. Celsius accepted FTT as collateral for many of its loans to Alameda.
Those loans were risky because FTX was the largest holder of its proprietary token and therefore
the valuation of those tokens was disconnected from market forces and subject to manipulation.
Alameda filed for bankruptcy in November 2022 along with FTX. The value of FTT has since
plummeted by roughly 95%, leaving Celsius holding nearly worthless collateral on any still
outstanding loans to Alameda backed by FTT.
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3. Celsius Deployed Investor Collateral on the Risky Anchor Protocol
62. Mashinsky misrepresented Celsius’s large positions in Terra stablecoin (“Terra”
or “UST”). Terra and Luna, its paired token, created by Terraform Labs, were particularly risky
because they were an algorithmic stablecoin project, a type of cryptocurrency which, despite the
inclusion of “stable” in its name, had in practice proven to be anything but. Prior algorithmic
stablecoin projects including Basis Cash, Iron Finance, and Empty Set Dollar had given way to
bank runs and death spirals that left the tokens worthless.
63. Terraform Labs also created the Anchor Protocol, a DeFi protocol which
promised a 20% yield on deposits of Terra. This high interest rate was heavily subsidized and
created artificial demand for Terra and Luna.
64. Mashinsky knew that the high yield promised by Anchor Protocol was too good
to be true. During a YouTube interview on December 3, 2021, Mashinsky himself told investors
that because “not all yield is created equal,” Celsius only used “safe protocols,” was “very
skeptical,” and “careful and [worked] with very few companies.” He cautioned that “if
somebody’s offering you [a yield] of 20%, I would be very careful digging into why and how
they’re paying it.”
65. Moreover, Mashinsky stated that subsidizing interest rates on a lending platform
was an “alarming” practice and criticized BlockFi, another cryptocurrency lending platform, for
having its rates subsidized by venture investors. He stated that “if BlockFi’s VCs ever chose to
stop funding the project, it’s possible that those rates could crash and burn….”
66. Celsius nevertheless deposited its investors’ assets on Anchor Protocol, despite
Mashinsky’s public acknowledgement of the risks of investing in protocols that paid such
unreasonably high yields subsidized by the protocol founder. In the span of only six weeks, from
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approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
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April 1 through May 6, 2022, Celsius invested approximately $468 million worth of digital
assets “on high earning Terra strategies.” This rapid deployment of funds brought Celsius’s total
assets invested on Terra strategies to $935 million.
67. When the prices of Terra and Luna crashed in May 2022, Mashinsky repeatedly
and misleadingly assured investors that Celsius had no exposure to the project, as alleged in
more detail below, to perpetuate his false narrative that Celsius made only low-risk investments
with investor assets.
V. During the Cryptocurrency Crash of May and June 2022, Mashinsky Continued to
Mislead Investors, Including About Celsius’s Financial Condition and Liquidity
68. Beginning in May 2022, following the collapse of Luna and Terra, the
cryptocurrency market came under stress and values of nearly all digital assets fell drastically,
with tens of billions of dollars in cryptocurrency market capitalization erased over the course of
just a few days. Large players in the cryptocurrency industry publicly suffered substantial losses
and some filed for bankruptcy. To perpetuate his scheme of keeping Celsius afloat at any cost,
even to the detriment of investors, Mashinsky continued to assure investors that their assets were
safe at Celsius.
A. In May 2022 Mashinsky Falsely Stated that Celsius Was as Strong as Ever, and
Actively Recruited New Investors
69. In May 2022, investors began to withdraw hundreds of millions of dollars’ worth
of cryptocurrency daily from the Celsius platform. Celsius saw its largest ever withdrawals on
May 12, 2022, when investors withdrew over half a billion dollars from the platform in a single
day.
70. The following day, in his May 13, 2022, AMA, Mashinsky stated that “Celsius is
stronger than ever, we have billions of dollars in liquidity… and we continue to do what Celsius
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does best – serve the community, protect the community, make sure your assets are there when
you need them.”
71. A few days later, on May 16, 2022, in a YouTube interview titled Luna/UST
Aftermath on Crypto Markets & Stablecoins, Mashinsky reiterated that “companies like
Celsius… are standing strong…. At Celsius we are ready at all times… we were ready with the
liquidity, we were providing everybody the option.”
72. Mashinsky’s statements were materially false and misleading. As a result of
losses from risky investments and unsustainable payments of high yields to investors, by May
13, 2022, Celsius had total assets of less than $12 billion and total liabilities of more than $12.75
billion, resulting in net assets of negative $820 million. Celsius was not “stronger than ever;” it
was insolvent.
73. Mashinsky also concealed that Celsius had begun to experience a liquidity crisis
in May 2022. According to the interim report of the examiner appointed in Celsius’s bankruptcy
proceeding, “[b]eginning in May 2022, Celsius faced liquidity challenges. In its May 2022
Board Minutes, Celsius reported that its ‘capital sits near zero.’ At the same time, between May
9, 2022, and May 24, 2022, customer withdrawals caused Celsius to experience a net loss of over
$1.4 billion in assets.”
74. To ameliorate Celsius’s liquidity crisis and to get new investors and new assets
onto the platform, Mashinsky misrepresented and concealed Celsius’s financial condition and
liquidity, and actively solicited new investors. In his May 27, 2022, AMA, Mashinsky played a
pre-recorded solicitation video which offered new investors a bonus for joining Celsius: “Did
you know you can earn crypto by referring a friend? You’ll get $50 in crypto for each completed
referral. Your friend will get a $50 referral reward too.”
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NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
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approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
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75. Mashinsky ramped up his efforts to solicit new investors on May 29, 2022, when
he sent the following message on Twitter: “These are hard times for many…. I will personally
give one of the new @CelsiusNetwork users $1000 this week if you show you opened an
account and started #HODLing to build your #FinancialFreedom.” The tweet received hundreds
of likes and retweets from the public.
76. Mashinsky’s efforts to solicit investors were effective, much to investors’
detriment. Even in the middle of the crypto downturn, between May 13 and June 12, Celsius
added almost $900 million worth of cryptocurrency, and between June 1 and June 17, 2022, it
added almost two thousand new users.
B. Mashinsky Misrepresented Celsius’s Exposure to the Fallout from Terra and
Luna
77. To dissuade investors from leaving Celsius and withdrawing assets from the
platform, Mashinsky made false and misleading statements that Celsius had not been exposed to
or suffered losses from the collapse of Terra and Luna.
78. During his June 1, 2022, YouTube interview, Mashinsky minimized Celsius’s
exposure to the Terra/Luna fiasco:
I know people are concerned about the whole market and they were
specifically concerned with the Terra/Luna situation and we’ve
publicly stated many times that we didn’t lend to them, we didn’t
buy Luna or UST, we were not like many others who invested in the
project, we didn’t have any exposure to that, we have very small
losses when we withdrew from the Anchor Protocol but these were
in a single millions [sic]….
79. Later in the same interview Mashinsky dismissed concerns that Celsius “must
have had huge damage from Luna,” saying “No, we didn’t have any, actually…. You should be
worried about other people.”
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80. Mashinsky’s statements were materially false and misleading. As set forth above,
Celsius invested nearly $935 million worth of investors’ assets into “high earning Terra
strategies,” which were highly speculative and risky and on which it lost almost $18 million
(nearly double what Mashinsky was willing to admit even when asked repeatedly in this
interview).
81. In the same interview, Mashinsky was asked whether Celsius had any other
exposure to the Terra-related turmoil. Mashinsky replied: “No other exposure that I know of....
There are other market participants who had big investments in Luna and UST, and so we
basically either reduced or eliminated any exposure to those parties.”
82. This statement was also false. Just weeks after the Terra/Luna collapse and mere
days before Mashinsky’s June 1, 2022, interview, Celsius made two loans to Three Arrows
Capital, Ltd. (“3AC”), a hedge fund that had just suffered large and very public losses as a result
of its exposure to Luna. On May 22, 2022, Celsius loaned 3AC $50 million in stablecoin,
collateralized by $50 million in Bitcoin. On May 31, 2022, Celsius made an additional $25
million loan to 3AC without requiring 3AC to post any collateral. On June 17, 2022, Celsius
liquidated 3AC’s Bitcoin collateral, which by then was worth only approximately $35 million.
83. 3AC filed for bankruptcy on July 1, 2022, still owing Celsius a total of $41
million. As an unsecured creditor, Celsius is unlikely to recover any significant portion of these
debts.
C. As Celsius Neared Bankruptcy, Mashinsky Continued to Mislead Investors
About Celsius’s Available Liquidity and Financial Condition
84. Mashinsky’s campaign to save Celsius by deceiving investors continued into June
2022. In an interview on June 1, 2022, Mashinsky was asked about “the elephant in the room;”
namely that, “after everything that’s happened recently, the number one question from people is
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‘are our funds safe at Celsius?’” Mashinsky replied: “yes, so not just that they’re safe… we
provided [the opportunity for] anyone who wanted to withdraw partially or fully, there were no
problems.”
85. In the same interview, Mashinsky was asked: “If there ever were any type of
insolvency issues, it sounds like you’ve got the framework and infrastructure with your
transparency to let the community know immediately if there is a problem…,” to which
Mashinsky replied “Yes.” This response was false and misleading because on May 25, 2022,
Celsius had less than $11 billion in total assets and approximately $11.9 billion in total liabilities,
with a deficit of almost $900 million, which Mashinsky did not disclose.
86. In his June 10, 2022, AMA – only two days before Celsius froze withdrawals
from its platform – Mashinsky said: “Celsius has billions in liquidity…. [W]e provide the
immediate access to everybody, anyone who needs access to it, to the liquidity.” In the same
AMA, Mashinsky stated “when you went through several bear markets, you know what to do…
you need to have liquidity, which we have… that’s why anyone who wants to withdraw has no
problem....”
87. The next day, on June 11, 2022, one Twitter user speculated about Celsius’s
ability to fulfill withdrawal requests: “I hope retail [investors] can get out. I’ve been hearing
about accounts locked.” Mashinsky immediately rejected the premise that Celsius investors
were in any danger, replying on Twitter: “[D]o you know even one person who has a problem
withdrawing from Celsius? Why spread FUD and misinformation.”
88. But the very next day, on June 12, 2022, Celsius paused investor withdrawals “in
order to stabilize liquidity and operations while we take steps to preserve and protect assets….”
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89. Mashinsky’s repeated statements in June of 2022 that Celsius had billions of
dollars of liquidity, that anyone who wanted to withdraw could do so, and that investor assets
were safe at Celsius were materially false and misleading. By this time Celsius’s liquid assets
were far less than Celsius’s liabilities to investors.
90. Celsius had experienced losses from the deployment of investor assets, resulting
in negative weekly gross revenue for four out of the six weeks prior to June 12, 2022. That
means that, for those weeks, Celsius paid more in interest to its EIA investors than it generated
through investments of their cryptocurrency. Celsius’s Chief Financial Officer confirmed this
during an August 19, 2022, meeting of creditors in Celsius’s bankruptcy case, when he stated: “It
does not look as though we had enough yield to support what we were paying out…. We paid
out over a hundred percent of the yield that we took in from deployments….”
91. As a result of losses from risky investments and unsustainably high yield
payments to investors, Celsius’s deficit (the difference between its assets and liabilities) had
increased to over $1 billion by mid-June 2022. Even then, Celsius’s assets were inflated because
they included the value of CEL, Celsius’s proprietary token, held on Celsius’s books. Celsius
was the largest CEL token holder and controlled its supply in the market, meaning that the token
was largely illiquid and of very speculative value. Celsius would never have been able to
convert any significant proportion of its CEL holdings into dollars without crashing the token’s
market value, which would have caused further harm to Celsius’s balance sheet.
92. Despite mounting losses, Mashinsky continued to conceal Celsius’s true financial
condition. While touting Celsius’s liquidity and strength in his numerous YouTube interviews
and weekly AMAs between May 1 and June 12, 2022, Mashinsky never disclosed that Celsius
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had close to a billion-dollar deficit on its balance sheet and that it continued to experience a
liquidity crisis. Rather he actively denied that there was any cause for concern.
93. After investors withdrew over $672 million in cryptocurrency between June 10
and June 12, 2022, Celsius paused withdrawals in order to “stabilize liquidity” and was never
able to restart them. Celsius filed for bankruptcy on July 13, 2022. By that point, Celsius had
over $4.7 billion in user liabilities, only $1.75 billion in cryptocurrency assets. Furthermore, at
least $467 million worth of investors’ cryptocurrency was locked up in a decentralized
application and unavailable for investor withdrawals, while additional investor assets were tied
up in Celsius’s other businesses.
VI. Mashinsky Misled Investors About Celsius’s Compliance with Applicable Laws and
Regulations
94. Celsius’s EIAs attracted the attention of state securities regulators in 2021. By the
end of September 2021, the securities regulators of Alabama, New Jersey, Texas, and Kentucky
had issued cease and desist orders to Celsius or notices of hearing seeking such orders, alleging
that EIAs were unregistered securities or that Celsius was soliciting or selling securities while
unregistered in violation of the respective states’ securities laws.
95. On October 18, 2021, the OAG sent a letter to Mashinsky and Celsius requesting
information and documents concerning Celsius’s EIAs and other business practices.
96. On October 20, 2021, Washington State’s Department of Financial Institutions
issued a statement of charges and a notice of intent to enter a cease-and-desist order against
Celsius for selling unregistered securities and for failing to register as a broker-dealer.
97. Yet in a December 3, 2021, YouTube interview, Mashinsky blatantly
misrepresented that “states and other regulators have looked into Celsius, they all came back
thumbs up, there’s no problem, we didn’t find anything….” Mashinsky’s statements were
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materially false and misleading because by that time at least five state securities regulators had
alleged that Celsius was engaged in the offer or sale of unregistered securities or was itself an
unregistered broker-dealer and had either directed Celsius to stop illegal activities in their states
or had indicated their intention to seek such an order. Likewise, the OAG certainly never gave
Celsius or Mashinsky a “thumbs up” or indicated there was “no problem” with their conduct.
Contrary to Mashinsky’s December 3, 2021, statement, multiple regulators were then actively
investigating – and continue to investigate – Celsius’s conduct.
VII. Mashinsky Violated New York State Registration Laws
98. By promoting EIAs through AMAs, YouTube interviews, and postings on
Celsius’s website, Mashinsky sold and offered for sale securities without registering with the
OAG as a securities dealer or a securities salesperson. Mashinsky also promoted and sold
commodities in the form of cryptocurrencies without registering with the OAG as a commodities
broker-dealer or a commodities salesperson.
99. EIAs are securities under the Martin Act because investors deposited their
cryptocurrency assets with Celsius with the expectation of receiving promised yields from
Celsius’s efforts in deploying investors’ pooled assets.
100. Under New York State law, a dealer is a person that is engaged in the business of
selling securities to the public within or from New York for its own account and selling or
offering for sale to the public securities issued by it. GBL § 359-e(1)(a).
101. As described above, Mashinsky offered, promoted, and sold EIAs, which he
issued to the public from New York. Mashinsky was the majority shareholder of Celsius, a
private company, and had access to the private keys to Celsius’s wallets, including to the wallet
containing cryptocurrency pooled from customer EIA accounts. Private keys grant access and
CAUTION: THIS DOCUMENT HAS NOT YET BEEN REVIEWED BY THE COUNTY CLERK. (See below.) INDEX NO. UNASSIGNED
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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determine ownership of the cryptocurrency. Mashinsky was a dealer under New York law and
promoted and sold securities for his own account within the meaning of GBL § 359-e(1)(a).
102. A salesperson is a person employed by a broker or dealer for the purpose of
representing them in the sale of securities to or from the public within or from New York. GBL
§ 359-e(1)(c). Mashinsky received a regular salary from Celsius and was employed by Celsius
for, among other reasons, the purpose of selling and promoting its EIAs. Mashinsky was a
salesperson within the meaning of GBL § 359-e(1)(c).
103. Mashinsky also acted as a salesperson without successfully completing the
required examinations known as the “Series 63” or the “Series 66” that cover securities industry
regulations and ethical practices and obligations.
104. As a dealer and salesperson of securities under New York law, Mashinsky was
required to file a registration statement with the OAG prior to engaging in such conduct. GBL
§ 359-e(3).
105. Mashinsky was not exempted from the filing requirements.
106. Mashinsky failed to file a registration statement in connection with Celsius with
the OAG prior to engaging in conduct that required such filing, in violation of GBL § 359-e(3).
107. Mashinsky also offered for sale from New York various cryptocurrencies to
investors worldwide. Digital assets are commodities under the Martin Act.
108. Under New York law, a commodity broker-dealer is a person engaged in the
business of selling or offering for sale commodities through commodity contracts to the public
from New York. GBL § 359-e(14)(a)(iii). A commodity salesperson is a person employed by or
representing a commodity broker-dealer in selling or offering for sale commodities through
commodity contracts to the public from New York. GBL § 359-e(14)(a)(iv).
CAUTION: THIS DOCUMENT HAS NOT YET BEEN REVIEWED BY THE COUNTY CLERK. (See below.) INDEX NO. UNASSIGNED
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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109. Mashinsky was engaged in the business of offering for sale and selling various
cryptocurrencies through commodity contracts to the public from New York, and received a
salary from Celsius, in part for promoting the sale of commodities, all through Celsius’s app or
website, Mashinsky was a commodity broker-dealer and a commodity salesperson under GBL
§ 359-e(14)(a). As a commodity broker-dealer and a commodity salesperson under New York
law, Mashinsky was required to file a registration statement with the OAG prior to engaging in
such conduct. GBL § 359-e(14)(b). Failure to register is a fraudulent practice under the Martin
Act unless exempt. GBL § 359-e(14)(j, l).
110. Mashinsky sold or offered for sale commodities primarily for speculation or
investment purposes and not for use or consumption by the offeree or purchaser.
111. Mashinsky was not exempted from the filing requirements, yet he failed to file a
registration statement in connection with Celsius with the OAG as a commodity broker-dealer or
commodity salesperson prior to engaging in conduct that required such filing, in violation of the
Martin Act.
112. Mashinsky’s failures to register under GBL § 359-e prior to offering or selling
securities and commodities to New York investors each constitute fraudulent practices under the
Martin Act. Such repeated and persistent conduct also constitutes illegality under Executive Law
§ 63(12).
CAUSES OF ACTION
FIRST CAUSE OF ACTION
Martin Act Securities Fraud – General Business Law §§ 352 and 353
113. The Attorney General repeats and re-alleges the paragraphs above as if fully
stated herein.
CAUTION: THIS DOCUMENT HAS NOT YET BEEN REVIEWED BY THE COUNTY CLERK. (See below.) INDEX NO. UNASSIGNED
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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114. The acts and practices of the Defendant alleged herein violated Article 23-A of
the General Business Law in that they consisted of materially false and misleading
representations, statements, and omissions relating to the issuance, exchange, purchase, sale,
promotion, negotiation, advertisement, investment advice or distribution of securities or
commodities, and constituted fraudulent acts and fraudulent practices as defined in GBL § 352 et
seq.
115. The acts and practices of the Defendant alleged herein constituted a scheme to
defraud and other fraudulent practices as defined in General Business Law §§ 352 et seq.
SECOND CAUSE OF ACTION
Martin Act Securities Fraud – General Business Law § 352-c(1)
116. The Attorney General repeats and re-alleges the paragraphs above as if fully
stated herein.
117. The acts and practices of the Defendant alleged herein violated General Business
Law § 352-c(1)(a), in that they involved illegal and prohibited acts or practices in the use or
employment of a fraud, deception, concealment, suppression, or false pretense, where said uses
or employments were engaged in to induce or promote the issuance, distribution, exchange, sale,
negotiation, or purchase within or from this State of any securities or commodities.
118. The acts and practices of the Defendant alleged herein violated General Business
Law § 352-c(1)(b), in that they involved illegal and prohibited acts or practices in the making of
promises or representations as to the future which were beyond reasonable expectation or
unwarranted by existing circumstances where said promises or representations were made to
induce or promote the issuance, distribution, exchange, sale, negotiation, or purchase within or
from this State of any securities or commodities.
CAUTION: THIS DOCUMENT HAS NOT YET BEEN REVIEWED BY THE COUNTY CLERK. (See below.) INDEX NO. UNASSIGNED
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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119. The acts and practices of the Defendant alleged herein violated General Business
Law § 352-c(1)(c), in that they involved illegal and prohibited acts or practices in the making of
representations or statements which are false, where Defendant (i) knew the truth; or (ii) with
reasonable effort could have known the truth; or (iii) made no reasonable effort to ascertain the
truth; or (iv) did not have knowledge concerning the representation or statement made, where
said representations were made to induce or promote the issuance, distribution, exchange, sale,
negotiation, or purchase within or from this State of any securities or commodities.
THIRD CAUSE OF ACTION
Martin Act Failure to Register – General Business Law § 359-e and Regulations
Promulgated Thereunder, 13 NYCRR §§ 10, 13
120. The Attorney General repeats and re-alleges the paragraphs above as if fully
stated herein.
121. The acts and practices of the Defendant alleged above violated New York General
Business Law § 359-e and regulations promulgated thereunder, including provisions of Official
Compilation of Codes, Rules, and Regulations of the State of New York Title 13, Chapter II,
Subchapter A, Parts 10 and 13, insofar as such acts and practices constitute the sale or purchase
of, or offer to sell or purchase, securities or engaging in the business of selling or offering to sell
commodities through commodity contracts, from or to the public within or from the state of New
York without filing a registration statement with the OAG.
FOURTH CAUSE OF ACTION
Repeated and Persistent Fraud – Executive Law § 63(12)
122. The Attorney General repeats and re-alleges the paragraphs above as if fully
stated herein.
123. The acts and practices of the Defendant alleged herein constitute conduct
proscribed by § 63(12) of the New York Executive Law, in that Defendant engaged in repeated
CAUTION: THIS DOCUMENT HAS NOT YET BEEN REVIEWED BY THE COUNTY CLERK. (See below.) INDEX NO. UNASSIGNED
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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fraudulent acts or otherwise demonstrated persistent fraud in the carrying on, conducting or
transaction of business in violation of Executive Law § 63(12).
FIFTH CAUSE OF ACTION
Repeated and Persistent Illegality – General Business Law §§ 352 and 353
Executive Law § 63(12)
124. The Attorney General repeats and re-alleges the paragraphs above as if fully
stated herein.
125. The acts and practices of the Defendant alleged herein constitute conduct
proscribed by Executive Law § 63(12), in that the Defendant engaged in repeated illegal acts in
violation of New York General Business Law §§ 352 and 353.
126. Accordingly, Defendant has engaged in repeated and persistent illegality in
violation of Executive Law § 63(12).
SIXTH CAUSE OF ACTION
Repeated and Persistent Illegality – General Business Law § 352-c(1)
Executive Law § 63(12)
127. The Attorney General repeats and re-alleges the paragraphs above as if fully
stated herein.
128. The acts and practices of the Defendant alleged herein constitute conduct
proscribed by Executive Law § 63(12), in that the Defendant engaged in repeated illegal acts in
violation of New York General Business Law § 352-c(1).
129. Accordingly, Defendant has engaged in repeated and persistent illegality in
violation of Executive Law § 63(12).
CAUTION: THIS DOCUMENT HAS NOT YET BEEN REVIEWED BY THE COUNTY CLERK. (See below.) INDEX NO. UNASSIGNED
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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SEVENTH CAUSE OF ACTION
Repeated and Persistent Illegality – General Business Law § 359-e and Regulations
Promulgated Thereunder, 13 NYCRR §§ 10, 13
Executive Law § 63(12)
130. The Attorney General repeats and re-alleges the paragraphs above as if fully
stated herein.
131. The acts and practices of the Defendant alleged herein constitute conduct
proscribed by Executive Law § 63(12), in that the Defendant engaged in repeated illegal acts, in
violation of New York General Business Law §359-e and regulations promulgated thereunder,
including provisions of Official Compilation of Codes, Rules, and Regulations of the State of
New York Title 13, Chapter II, Subchapter A, Parts 10 and 13, insofar as such acts and practices
constitute the sale or purchase of, or offer to sell or purchase, securities or engaging in the
business of selling or offering to sell commodities through commodity contracts, from or to the
public within or from the state of New York without filing a registration statement with the
OAG.
132. Accordingly, Defendant has engaged in repeated and persistent illegality in
violation of Executive Law § 63(12).
CAUTION: THIS DOCUMENT HAS NOT YET BEEN REVIEWED BY THE COUNTY CLERK. (See below.) INDEX NO. UNASSIGNED
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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PRAYER FOR RELIEF
WHEREFORE, Plaintiff demands judgment against Defendant as follows:
A. Permanently enjoining Defendant from violating the Martin Act, Article 23-A of
the General Business Law, and Executive Law § 63(12) and from engaging in the fraudulent,
deceptive and illegal acts alleged herein;
B. Permanently enjoining Defendant from engaging in any business related to the
issuance, offer, distribution, exchange, promotion, advertisement, negotiation, purchase,
investment advice, or sale of securities or commodities, including any cryptocurrencies or digital
assets, within or from this state;
C. Permanently enjoining Defendant from serving as an officer or director of any
company doing business in this state;
D. Directing Defendant to pay damages caused, directly or indirectly, by the
fraudulent and deceptive acts and repeated fraudulent acts and persistent illegality complained of
herein plus applicable pre-judgment interest;
E. Directing Defendant to disgorge all amounts or assets obtained in connection with
or as a result of the fraudulent and deceptive acts and violations of law alleged herein;
F. Directing Defendant to make restitution of all amounts or assets obtained from
investors in connection with the fraudulent and deceptive acts and violations of law complained
of herein;
G. Directing that Defendant pay Plaintiff’s costs and fees;
H. Directing such other equitable relief as may be necessary to redress Defendant’s
violations of New York law; and
CAUTION: THIS DOCUMENT HAS NOT YET BEEN REVIEWED BY THE COUNTY CLERK. (See below.) INDEX NO. UNASSIGNED
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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I. Granting such other and further relief as may be just and proper.
Dated: New York, New York
January 5, 2023
L
ETITIA
J
AMES
Attorney General of the State of New York
By: _________________________
Tanya Trakht
Jesse Devine
Assistant Attorneys General
Matthew Woodruff
Senior Enforcement Counsel
Kenneth Haim
Acting Deputy Chief, Investor Protection
Bureau
Shamiso Maswoswe
Chief, Investor Protection Bureau
28 Liberty Street
New York, New York 10005
Tel.: (212) 416-8457
Counsel for the People of the State of New York
CAUTION: THIS DOCUMENT HAS NOT YET BEEN REVIEWED BY THE COUNTY CLERK. (See below.) INDEX NO. UNASSIGNED
NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2023
This is a copy of a pleading filed electronically pursuant to New York State court rules (22 NYCRR §202.5-b(d)(3)(i))
which, at the time of its printout from the court system's electronic website, had not yet been reviewed and
approved by the County Clerk. Because court rules (22 NYCRR §202.5[d]) authorize the County Clerk to reject
filings for various reasons, readers should be aware that documents bearing this legend may not have been
accepted for filing by the County Clerk.
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