In a recent court filing on Monday, former CEO of Celsius Alex Mashinsky filed a request that the Federal Trade Commission [FTC] drop its ongoing case against him. The crypto lending platform filed for bankruptcy amid the market downturn, and Mashinsky was subsequently arrested in July, facing charges related to fraud and the alleged manipulation of the CEL token’s price.
So far, the top exec has maintained his innocence, deeming the charges groundless. Now, his lawyers argue that the FTC should dismiss claims that he misled investors. Mashinsky’s legal team contends that the allegations do not support the assertion that he deliberately made false statements to obtain customer information from a financial institution, a requirement under the Gramm-Leach-Bliley Act of 1999.
Joining Mashinsky in his defense is his former Chief Technology Officer, Hanoch “Nuke” Goldstein, who asserted that the FTC should establish more specific rules before pursuing novel cases like marketing fraud. Goldstein believes that he is unfairly implicated due to his association with other Celsius executives, citing a retweet of a Celsius blog as the basis for his involvement in the case.
Celsius’ Mounting Legal Trouble
Meanwhile, U.S. Attorney Damian Williams has requested that the court temporarily halt FTC proceedings to prevent potential prejudice to the parallel criminal case. Mashinsky, who resigned as CEO in September 2022 following Celsius’s bankruptcy filing, remains released on a $40 million bond, with his banking and real estate assets recently frozen by court order.
Earlier, the Commodity Futures Trading Commission [CFTC] accused Celsius of defrauding investors out of billions of dollars. The SEC also alleged that Celsius’ token CEL and its erstwhile Earn Interest Program are securities, adding to the agency’s recent stance in other filings that a number of cryptocurrencies like BNB, BUSD, SOL, ADA, and MATIC are securities. This adds another layer of complexity to the ongoing legal saga surrounding the embattled crypto loan platform.
In May, a consortium called Fahrenheit declared that it had acquired Celsius’ assets. The group’s plan is to distribute the platform’s liquid assets to account holders. Illiquid assets, such as its institutional loan portfolio, mining business, and alternative investments, will be managed by a new management team.