Celsius to Recover ‘Fraudulently Transferred’ Funds from Former CEO, Other Senior Execs

Insolvent crypto lender Celsius has filed a motion to recover the ‘millions’ of funds from companies affiliated with ex-CEO Alex Mashinsky.

Bankrupt crypto lending platform Celsius Network LLC currently seeks to recover funds from founder and former CEO Alex Mashinsky and his associates. Reports state the embattled company and its creditors want Mashinsky, his wife, and other ex-senior execs to repay the millions illicitly transferred in the run-up to its July bankruptcy.

Court documents published on Tuesday allege that Mashinsky and his associates mismanaged Celsius and hiked its CEL token price for their own benefit. In addition, the accused, including Celsius co-founder S. Daniel Leon, made “negligent, reckless and sometimes self-interested investments” prior to Celsius’ insolvency.

“The Complaint would bring claims and causes of action against the Prospective Defendants to return millions of dollars removed from the Celsius platform,” read the filing.

Furthermore, the court document also stated that Celsius seeks to recover damages from the billion-dollar funds lost “by the Prospective Defendants’” injudiciousness.

The 150-page filing revealed recovery, costs, and punitive damages based on 33 counts. Furthermore, the document also exhibited the transfer of billions to the Mahinsky-partly owned decentralized finance (DeFi) platform KeyFi. Although the stated purpose of the transfer at the time was for ‘speculative investments,’ Celsius claims it lost $200 million.

Celsius Looks to Recover Funds from Mashinsky-Controlled Companies

The filing also cited a $2.8 million transfer to Mashinsky’s own wallet last May as an alleged fraudulent transfer under the US bankruptcy code. This code considers as suspect any payment made up to two years before a company becomes insolvent.

Celsius also referenced $12 million and $5 million transfers to a duo of Mashinsky-owned and controlled companies, namely AM Ventures and Koala LLP, respectively.

Earlier reports also stated that Celsius’ creditors’ committee proposed suing Mashinsky and other former senior execs for “gross mismanagement.” Lawyers for the committee, which includes 7 Celsius account holders, wrote:

“The Committee’s investigation has uncovered significant claims and causes of action based on fraud, recklessness, gross mismanagement, and self-interested conduct by the Debtors’ former directors and officers.”

The committee’s lawyers also added:

“Finally, when it became apparent that Celsius would be required to file for bankruptcy, the Prospective Defendants withdrew assets from the sinking ship […] while actively encouraging customers to keep their assets on the Celsius platform.”

According to the Celsius creditors’ committee, the proposed complaint marks the first of several steps in its investigation regarding asset recovery.

The creditors’ committee lawsuit development follows the lawsuit against Mashinsky by a New York state attorney general in January.

Celsius Bankruptcy & Restructuring

Last July, Celsius filed for Chapter 11 Bankruptcy protection after weeks of struggling to stay afloat. At the time of its insolvency declaration, the New Jersey-based crypto lender explained the bankruptcy proceedings would stabilize its business. Furthermore, Celsius also suggested that the ‘Chapter 11′ development would aid a restructuring plan to repay its customers.

Celsius’ so-called restructuring plans are still under development, and late last month, the company proposed issuing bankruptcy crypto tokens. According to Celsius, these tokens form part of a broader “recovery corporation” scheme and would be used to repay creditors.

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Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.

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