Celsius' official creditors' committee proposes to sue Celsius co-founder Alex Mashinsky and other executives for "fraud, recklessness, gross mismanagement and self-serving conduct" that eventually led to the collapse of the crypto lender.
in a proposal complaint Filed in a New York Bankruptcy Court on February 14, attorneys representing the Official Committee on Unsecured Creditors said the move follows six months of investigations into Celsius' current and former directors, officers and employees.
The committee is made up of seven Celsius account holders and was appointed by the US Receiver in July 2022. The committee represents the interests of Celsius account holders along with unsecured creditors.
1-In connection with its investigation, the UCC has identified significant claims and causes of action that Celsius has against Alex Mashinsky and other insiders for breaches of their fiduciary duties, fraudulent transfers, and other causes of action.
โ Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) February 14, 2023
โThe Committee's investigation has uncovered significant claims and causes of action based on fraud, recklessness, gross mismanagement, and self-serving conduct on the part of the Debtors' former directors and officers,โ attorneys for White & Case LLC wrote.
The proposed lawsuit, seeking damages in an amount to be proven at trial, seeks to bring claims and causes of action against the following Celsius executives, individuals, and their associated entities:
- Alex Mashinsky, Co-Founder, Director and Former CEO
- Daniel Leon, Co-Founder, Director, and Former CSO and COO
- Hanoch โNuke Goldstein, Co-Founder and CTO
- Harumi Urata-Thompson, former CFO and CIO
- Jeremie Beaudry, former General Counsel and CCO
- Johannes Treutler, former head of the Celsius trading desk and person in charge of buying CEL tokens on behalf of Celsius
- Aliza Landes, former VP of Celsius Lending and wife of Daniel Leon
- Kristine Mashinsky, the wife of Alex Mashinsky
"Mr. Mashinsky, Mr. Leon, Mr. Goldstein, Mr. Beaudry, Ms. Urata-Thompson, and Mr. Treutler breached their fiduciary duties to Celsius," the attorneys wrote, adding:
โThose parties knew that Celsius was promising interest payments to its customers that it was unable to pay and did nothing to fix the problem.โ
Lawyers have also alleged that executives made "negligent, reckless (and sometimes selfish) investments" that caused Celsius to lose $1 billion in a single year, while mismanagement led to another $250 million loss "because could not adequately account for the assets and liabilities of the companyโ.
"After that loss, they did not invest in or develop the company's systems to properly fix the problem, which resulted in more losses," they alleged.
The motion also alleges that the executives ordered Celsius to spend "hundreds of millions of dollars" in the public markets to inflate the price of CEL tokens, while they "secretly sold tens of millions of CEL tokens (or were aware of of such sales)" for his own benefit.
โThey stood idly by as Mr. Mashinsky recklessly bet hundreds of millions of dollars on the movement of the cryptocurrency market. They covered up Mr. Mashinsky's repeated lies about Celsius' investments and financial situation."
Related: Judge Denies Motions From Celsius Users Seeking To Claim Assets
โEventually, when it became apparent that Celsius would have to file for bankruptcy, potential defendants removed assets from the sinking ship. [...] while actively encouraging clients to keep their assets on the Celsius platform," the lawyers added.
Celsius' creditors' committee said the proposed complaint was just the "first of many steps" in its investigation into possible wrongdoing by the former Celsius executive and the return of property to victims.
5-The goal of the UCC, as always, is to maximize recoveries for the benefit of Celsius' clients and unsecured creditors who fell victim to the negligent, reckless, and fraudulent conduct of Mr. Mashinsky and others.
โ Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) February 14, 2023
A hearing regarding the proposed complaint will be held on March 8, 2023.
Cointelegraph reached out to Celsius for comment but did not receive an immediate response.
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