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• New York Attorney General Letitia James sued Celsius cofounder and former CEO Alex Mashinsky on Thursday. 
• The attorney general’s office is accusing Mashinsky of defrauding investors. 
• “The law is clear that making false and unsubstantiated promises and misleading investors is illegal,” James said. 

New York Attorney General Letitia James sued Celsius cofounder and former CEO Alex Mashinsky on Thursday, alleging he defrauded customers of billions in cryptocurrencies. 

The suit says he engaged in an effort to routinely mislead investors with false information that portrayed Celsius’ financial health as sound in order to facilitate customer deposits and trust. It added that Mashinsky didn’t properly reveal himself as acting on behalf of Celsius as both a salesperson and a securities and commodities dealer. 

“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” James said in a statement. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal. Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses.”

The New York AG accused him defrauding hundreds of thousands of investors, including more than 26,000 New Yorkers.

The suit seeks to ban Mashinsky from conducting any future busines in New York State as well as force him to make restitution to customers and pay damages.

Mashinsky did not immediately respond to Insider’s request for comment. 

Celsius filed for bankruptcy in July and held roughly $4.2 billion in assets at the time of the filing. Mashinsky resigned as CEO in September.

On Wednesday, a US bankruptcy judge ruled that up to $4.2 billion in customer funds are the property of Celsius, meaning it can use them any way it wants. The decision will allow Celsius to sell $18 million in stablecoin to pay its bills to stay longer in Chapter 11 bankruptcy. 

Mashinsky launched Celsius in 2017, and it eventually grew into one of the largest crypto lenders, managing as much as $20 billion in assets.

Meanwhile, Celsius also received a federal grand jury subpoena in June, according to a bankruptcy filing in October. And Celsius clients have filed a proposed class-action suit against the company and Mashinsky, alleging it was a Ponzi scheme.