Celsius demanded that Maszynski return funds withdrawn from the platform

Celsius demanded that Maszynski return funds withdrawn from the platform

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Author: Robert Strickland
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Celsius demanded that Maszynski return funds withdrawn from the platform
Lawyers for the bankrupt cryptocurrency lender have asked the court for the return of millions of dollars the company lost because of the actions of its former management

Celsius and its creditors have launched a lawsuit to recover millions of dollars in funds they say were illegally withdrawn from the company by its founder Alex Mashinsky, his wife and other former top executives. The documents demanding damages were filed with the court by the company's lawyers on February 14.

Celsius' problems began in June 2022, with the company suspending all withdrawals and transfers between accounts due to "extreme market conditions." In July, the platform announced the dismissal of 150 employees, began restructuring its business and filed for bankruptcy.

In mid-August, it became known that Celsius Network's debts exceeded its assets by $2.85 billion. The amount of money the platform lacked to pay creditors was almost 2.5 times what it had declared when it filed for bankruptcy, when the shortfall was estimated at $1.2 billion.

Mashinsky stepped down as CEO of Celsius on Sept. 27.

Court documents dated Feb. 14 allege that Maszynski, Celsius co-founder S. Daniel Leon and others have been incompetent in their management of the company. The documents allege that they manipulated the price of the CEL token to their own advantage and made "reckless, reckless and sometimes self-serving investments" that caused Celsius to lose more than $1 billion in a year.

The 154-page document, which Celsius' lawyers filed in court, seeks damages, costs and punitive damages. They include the return of $4.9 million withdrawn from the platform by Maszynski's wife Christine Maszynski, more than $25 million by other company employees and $2.8 million withdrawn by Maszynski himself last May.

It was revealed in October that Mashinsky withdrew $10 million from Celsius before all operations were suspended. A spokesman for the company claimed that these were pre-planned payments, and the former head of the bankrupt cryptocurrency lender funneled the funds to pay taxes.

Creditors also intend to recover amounts that former Celsius executives invested in other companies. Those include $12.1 million from AM Ventures Holding, $5 million from Koala1 LLC and $4 million from Alchemy Capital Partners.

A day later, on Feb. 15, Celsius' lawyers submitted to the court a plan to sell the company, which is part of an overall plan to reorganize Celsius' lending platform and mining business. The plan is based on an agreement in principle with investment firm NovaWulf Digital Management.

NovaWulf will contribute between $45 million and $55 million to NewCo (the temporary name of the new company to replace Celsius). NewCo will become a public company; none of the founders of Celsius will participate in the management of NewCo.

 

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