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The proposed lawsuit names Alex Mashinsky and a number of former executives and co-founders for alleged “recklessness, gross mismanagement, and self-interested conduct.”

The official committee of Celsius creditors is proposing to sue Celsius co-founder Alex Mashinsky and other executives for "fraud, recklessness, gross mismanagement and self-interested conduct" that eventually led to the collapse of the crypto lender.

In a proposed complaint filed in a New York Bankruptcy Court on Feb. 14, attorneys representing the Official Committee of Unsecured Creditors said the move follows six months of investigations into Celsius’ current and former directors, officers and employees.

The committee is made up of seven Celsius account holders and was appointed by the U.S. Trustee in July 2022. The committee represents the interest of Celsius' account holders along with unsecured creditors.

1-In connection with its investigation, the UCC has identified significant claims and causes of action that Celsius has against Alex Mashinsky and other insiders for breaching their fiduciary obligations, fraudulent transfers, and other causes of action.

— Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) February 14, 2023

“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,” wrote lawyers from White & Case LLC.

The proposed lawsuit — which seeks damages in an amount to be proven at trial — aims to bring claims and causes of action against the following Celsius executives, persons and their associated entities:

• Alex Mashinsky, co-founder, director and former CEO
• Daniel Leon, co-founder, director and former CSO and COO
• Hanoch “Nuke Goldstein, co-founder and CTO
• Harumi Urata-Thompson, former CFO and CIO
• Jeremie Beaudry, former General Counsel and CCO
• Johannes Treutler, former head of Celsius’ trading desk and person in charge of purchasing CEL tokens on behalf of Celsius
• Aliza Landes, the former VP of Lending of Celsius and spouse of Daniel Leon
• Kristine Mashinsky, the spouse of Alex Mashinsky

“Mr. Mashinsky, Mr. Leon, Mr. Goldstein, Mr. Beaudry, Ms. Urata-Thompson, and Mr. Treutler breached their fiduciary obligations to Celsius,” the lawyers wrote, adding:

“Those parties were aware Celsius was promising its customer's interest payments that it could not afford and did nothing to fix the problem.”

The lawyers have also alleged the executives made “negligent, reckless (and sometimes self-interested) investments” causing Celsius to lose $1 billion in a single year, while mismanagement led to another quarter-of-a-billion dollar loss “because they could not adequately account for the company’s assets and liabilities.”

“After that loss, they did not invest in or develop the company’s systems to adequately fix the issue, resulting in further losses,” they alleged.

The motion also alleges the executives directed Celsius to spend “hundreds of millions of dollars” on public markets to inflate the price of CEL tokens, while they “secretly sold tens of millions of CEL tokens (or were aware of such sales)” for their own benefit.

“They sat idly by as Mr. Mashinsky recklessly bet hundreds of millions of dollars on the movement of the cryptocurrency market. They covered up Mr. Mashinsky’s repeated lies about Celsius’ investments and financial condition.”

Related: Judge denies motions from Celsius users seeking to reclaim assets

“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," the lawyers added.

The Celsius creditors committee said the proposed complaint was just the “first of many steps” in its investigation into potential former Celsius executive wrongdoings and the return of assets to victims.

5-The UCC’s goal, as always, is to maximize recoveries for the benefit of Celsius’ customers and unsecured creditors who were victims of the negligent, reckless, and fraudulent conduct of Mr. Mashinsky and others.

— Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) February 14, 2023

A hearing with respect to the proposed complaint will be held on March 8, 2023.

Cointelegraph contacted Celsius for comment but did not receive an immediate response.