Who is Alex Mashinsky, the man behind the alleged Celsius cryptocurrency scam?

Mashinsky, 57, fraudulently promoted Celsius as a safe alternative to banks while concealing that he was losing hundreds of millions of dollars in risky investments, according to a lawsuit filed Thursday by New York Attorney General Letitia James.

The civil suit seeks to bar Mashinsky from doing business in New York and compel him to pay damages, restitution and disgorgement.

James’ lawsuit is the latest dark eye for the crypto industry, which has been rocked by allegations against the founder of crypto exchange FTX, Sam Bankman-Fried. The former tycoon, who has been accused of defrauding investors and causing billions of dollars in losses, pleaded not guilty on Tuesday.

Mashinsky, a native of Ukraine whose family migrated to Israel, decided to move to New York after taking a trip to the city in 1988, he told a Forbes podcast.

I looked around me and said to myself: I will not come back,” he said.

Since then, he has founded eight companies, including Arbinet, which went public in 2004, and Transit Wireless, which provides Wi-Fi on the New York City subway.

Mashinsky claims to have created Voice over Internet Protocol (VoIP), a precursor to the ride-sharing app Uber, as well as a cryptocurrency idea that predates bitcoin.

Mashinsky got involved in crypto in 2017, when his venture capital fund, Governing Dynamics, tapped blockchain firm MicroMoney as a strategic partner. She founded Celsius in the same year.

During his teenage years, Mashinsky bought confiscated goods, such as hair dryers and VCRs, at customs auctions at Israel’s Ben Gurion Airport and resold them for a profit, according to a 1999 article in the now-defunct technology publication, Industry Standard.

Mashinsky aspired at the time to start a whole-body transplant business: “Give an old person a new body — keep the head, keep the spine, and recreate the rest,” he said.

Quadri served in the Israeli army from 1984 to 1987, where he trained as a pilot and served in the Golani infantry units, according to his personal website.

Mashinsky has raised more than $1.5 billion for various companies that raised more than $3 billion when he and other investors pulled out, according to his website, which also says he holds more than 50 patents.

“The biggest risk is not taking it,” says the homepage.

In hundreds of interviews, blog posts and live broadcasts as the public face of Celsius, Mashinsky has promised his clients that they will receive high returns if they deposit digital assets on his platform, with minimal risk. , according to the New York Attorney General’s lawsuit.

Neither Mashinsky nor his attorney immediately responded to requests for comment Thursday.

Celsius promised investors would earn returns of up to 17%, among the highest in the industry. “We take money from the rich,” Mashinsky said in the lawsuit.

By early 2022, it had raised $20 billion in digital assets from investors. But the company struggled to generate enough revenue to pay the promised returns and embarked on much riskier investments, according to the complaint.

According to the lawsuit, the company made hundreds of millions of dollars in unsecured loans and invested hundreds of millions more in unregulated and decentralized financial platforms.

Mashinsky, who wore T-shirts with slogans such as “banks are not your friends,” continued to misrepresent to investors that Celsius was generating high returns on low-risk investments, according to the legal filing.

In a June 10 “Ask Mashinsky Anything” YouTube video, the entrepreneur said “Celsius has billions in cash.” Two days later, it halted investor withdrawals “to stabilize liquidity and operations.”

On July 13, Celsius filed for Chapter 11 protection under the Creditors Act, posting a $1.19 billion deficit on its balance sheet.

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