New York Attorney General Letitia James said Friday that former Celsius CEO Alex Mashinsky has agreed to settle the state’s civil fraud case, with financial penalties that could reach $35 million and a permanent ban from the securities, commodities and cryptocurrency industries.

The case centered on allegations that Mashinsky misled hundreds of thousands of investors about the safety of deposits on Celsius. Mashinsky is already serving a 12-year federal prison sentence for securities and commodities fraud tied to the failed crypto lender.

Terms of the settlement

According to the attorney general, the settlement requires Mashinsky to pay New York $25 million if he does not forfeit $10 million in alleged ill-gotten gains to the federal government. The agreement also adds another $10 million penalty if he does not serve his full prison sentence.

Alongside the monetary terms, the settlement permanently bars Mashinsky from participating in the securities, commodities and crypto sectors. The attorney general presented the outcome as a civil resolution tied to the state’s claims over how Celsius was marketed to customers.

What New York alleged

James said Mashinsky had described Celsius as safer than a bank while the company was deploying customer assets in risky strategies and hiding losses. The state’s case accused him of misleading investors about the safety of funds placed with the platform.

In announcing the settlement, James said she would not allow scammers to use cryptocurrencies to exploit New Yorkers. Her office framed the case as part of a broader effort to hold crypto executives accountable when marketing claims do not match how customer funds are handled.

Celsius collapse and bankruptcy recoveries

Celsius froze customer withdrawals in June 2022, cutting off access to funds during a wider market crisis. A month later, the company filed for bankruptcy.

As of August, Celsius customers and creditors had received more than $3.4 billion through the bankruptcy process, according to the attorney general. When Celsius emerged from bankruptcy in 2024, the company had planned to distribute roughly $3 billion in crypto and cash, using Coinbase and PayPal to deliver payments.

Where the case stands now

The New York settlement closes the state’s civil matter on terms that combine industry bans with contingent financial penalties. It comes after Mashinsky’s federal criminal case, which resulted in a 12-year prison sentence for securities and commodities fraud.

The next confirmed step is tied to enforcement of the settlement’s payment provisions, which depend on whether Mashinsky forfeits $10 million to the federal government and whether he serves his full prison term. Bankruptcy distributions to former Celsius customers and creditors have already continued separately through the court process.

Source: www.coindesk.com