The defunct cryptocurrency loan platform Celsius Network LLC is pursuing a claim against its founder and former CEO Alex Mashinsky and his associates to recover monies.
According to the reports (1), the financially troubled company and its lenders want Mashinsky, his wife, and other former senior executives to pay back the millions of dollars that were fraudulently transferred in the lead-up to the company's bankruptcy filing in July.
According to court documents (2) that were revealed on Tuesday, the defendant, Mashinsky, and his associates are accused of mismanaging Celsius and artificially inflating the price of its CEL tokens for their advantage.
Others who have been accused, including S. Daniel Leon, a co-founder of Celsius, are said to have made "negligent, reckless, and occasionally self-interested investments" before the collapse of Celsius.
The submitted document states, "The Petition would raise claims and causes of action against Potential Defendants to recover millions of dollars withdrawn from the Celsius platform."
In addition, the legal filing noted that Celsius is seeking to sue for damages from the billions of dollars in cash that were lost "by the Prospective Defendants'" imprudence.
The document, which was 150 pages long, detailed the possible recovery, fees, and punitive penalties based on the 33 allegations. In addition, the document demonstrated the movement of billions of dollars to the decentralized finance (DeFi) platform known as KeyFi, which Mahinsky partially owns.
Celsius asserts that it sustained a loss of $200 million even though the speculative investments' were the declared reason for the transfer at the time.
Celsius is Attempting to Retrieve Lost Funds
According to the US bankruptcy code, the filing also mentioned an alleged fraud transfer in May last year when $2.8 million was sent to Mashinsky's pocket. According to this rule, any payment made for up to two years until a corporation declares bankruptcy is considered questionable.
Celsius also mentioned transfers of $12 million and $5 million to two firms owned and managed by Mashinsky, AM Ventures, and Koala LLP. Both entities received their funds from Celsius.
Earlier reports said that the creditors' committee of Celsius had raised the idea of suing Mashinsky or other former senior executives of the company for "gross mismanagement."
Lawyers for the committee, which is comprised of account holders for 7 Celsius, said:
"As it became obvious that Celsius might be needed to declare bankruptcy, the Prospective Defendants (Mashinsky) withdrew resources from the sinking ship [...] while also encouraging clients to keep their investments on the Celsius platform," the lawsuit states. "
According to the creditors' committee of Celsius, the planned complaint is the first of many steps in the inquiry involving asset recovery conducted by the committee.
The filing of the action by the creditors' committee comes after the filing of a lawsuit against Mashinsky in January by an attorney general from the state of New York.
Celsius Insolvency & Reorganization
After weeks of trying to stay afloat, Celsius filed for bankruptcy in July last year. The cryptocurrency lender in New Jersey said that the insolvency proceedings would help stabilize its firm when it announced it was going bankrupt.
In addition, Celsius proposed that the 'Chapter 11' development would facilitate a reorganizational strategy to assist the company in repaying its customers.
The so-called reorganization plans for Celsius are still being developed, and the company proposed releasing bankruptcy crypto tokens at the end of the previous month.
According to Celsius, these tokens are a component of a larger plan referred to as a "recovery corporation" and would be used to settle debts owed by Celsius's investors.