The New York Attorney General is suing founder of the bankrupt crypto currency.

Letitia James is the New York Attorney General. lawsuitOn Thursday, the Celsius Network bank founder collapsed. He was accused of a scheme that defrauded hundreds of thousands investors.

The lawsuit stems primarily from Celsius’s internal collapse this summer, when the company filed to bankruptcy and its customers lost billions. The lawsuit claims that Celsius founder Alex Mashinsky, aged 57, misled customers to deposit their crypto savings on the platform. He promised it was as secure and as safe as traditional banks. The suit seeks to stop him from doing business in New York, and to demand that he pay damages.

“When Celsius incurred losses on risky investments, Mashinsky failed to disclose these losses to investors,” the suit said. “The collapse of Celsius has left many individuals despondent and financially ruined.”

A spokesperson for Celsius stated in a statement, that Mr Mashinsky had resigned from the management of the company. A request for comment was not answered by Mr. Mashinsky.

This lawsuit is the latest aggressive response by the government to the widespread fraud and risky practices that have pushed the digital currency industry into financial crisis in 2022. Last month, US prosecutors AccusedSam Bankman-Fried is the founder of the infamous cryptocurrency exchange FTX. He was also a victim to massive frauds. Mr. Bankman Fried also faces civil charges by the Securities and Exchange Commission and CFTC.

Wednesday will also see the Securities and Exchange Commission. PayThe US arm Binance, which controls cryptocurrency exchange giant Binance, plans to purchase Voyager Digital, a crypto lending operation that is similar to Celsius.

Celsius’s December bankruptcy was prior to FTX. It was widely considered the worst moment in 2022 cryptocurrency. Mashinsky has been marketing the company for years with a promise that promises up to 17% interest in crypto deposits.

He was a successful and charismatic partner to the industry’s growth. He has appeared in YouTube videos to promote Celsius as a populist, egalitarian solution to the traditional banking system. He said that it rips customers. Suit reports that he had recorded 179 videos titled “Ask Me Anything” by June. Most of these videos were approximately an hour long.

The proposal of Mr. Mashinsky was accepted. Celsius, a New Jersey-based company, managed $20 billion in assets in 2021.

There were some cracks when the cryptocurrency industry began to take off in May. The lawsuit stated that the company experienced higher percentage growth and struggled to generate enough income to pay high returns.

“In search of revenue, Celsius has moved into significantly riskier investments, providing hundreds of millions of dollars in unsecured loans, and investing hundreds of millions of dollars in unregulated decentralized finance platforms,” the lawsuit said.

Some of Celsius’s risky loans went towards Alameda Research, a crypto hedge-fund founded by Fred. According to the lawsuit, Celsius lent Alameda $1 billion between 2020-2022. Celsius accepted FTT, a cryptographic token created by Mr. Bankman Fried, as collateral for loans. FTT’s market value plummeted during this fall, contributing greatly to the collapses of Alameda & FTX.

Celsius was already in serious trouble by that time. company collapsedIn June, filed for bankruptcy. After Brief attemptMr. Mashinsky is responsible for bringing back the company. to resignSeptember Customers are now scrambleto recover any remaining savings and to retain lawyers to assist them in the bankruptcy process.