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Cryptocurrency sector faces fresh reckoning as US authorities pounce

The cryptocurrency and digital asset sector is facing further reckoning with US authorities lodging two separate fraud cases against operators in the space while a once-major trading platform considers filing for bankruptcy.

Overnight, New York authorities took legal action to ban the former boss of cryptocurrency lender Celsuis Network, Alex Mashinsky, from doing business in the state.

New York Attorney General Letitia James said in a lawsuit filed against Mashinsky that the former CEO of Celsius Network misled investors, leading them “down a path of financial ruin”.

A horror year for bitcoin has seen the cryptocurrency’s value plummet.

A horror year for bitcoin has seen the cryptocurrency’s value plummet.Credit:Bloomberg

In her lawsuit filed in state court in Manhattan, James said Mashinsky, a co-founder of Celsius, “engaged in a scheme to defraud hundreds of thousands of investors” by getting them to put billions of dollars’ worth of their digital assets in his platform.

The lawsuit alleges that Mashinsky promised hefty returns and said Celsius was as safe as a bank, but meanwhile was engaging in risky investments and not telling investors when those investments failed.

Celsius filed for bankruptcy in July amid a $US2 trillion ($2.9 trillion) market crash that wiped out some of the industry’s biggest names and exposed hundreds of thousands of investors to steep losses. The lender, which had made risky bets before the collapse, at the time disclosed a $US1.19 billion deficit. Celsius said previously that Alameda Research, the trading firm co-founded by Bankman-Fried that’s now at the centre of his criminal case, owes the lender $US12 million.

Also overnight, the Wall Street Journal reported that Genesis Global Trading was considering filing for bankruptcy. Genesis confirmed overnight that it had laid off more than 60 employees in its latest round of job cuts, amounting to roughly 30 per cent of the troubled crypto-brokerage’s workforce.

The dismissals follow a separate round of job eliminations last year that saw a number of key leadership departures, and signal further upheaval at the New York-based firm amid an extended rout in the digital-assets market. The company now has 145 employees remaining, according to a Genesis spokesperson.

And capping off the already bad day for the sector, US prosecutors charged a French national with defrauding buyers of his “Mutant Ape Planet” non-fungible tokens, alleging he duped investors out of more than $US2.9 million in cryptocurrency before his arrest Wednesday in at a New York airport.

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