Criminal charges against ex-Celsius CEO must stick, prosecutors say

U.S. prosecutors have pushed back against former Celsius CEO Alex Mashinsky’s motion to dismiss two criminal charges brought against him.

Prosecutors argued that the charges, which include commodities fraud and market manipulation, show Mashinsky’s intention to mislead investors about his crypto platform’s profitability and business practices and manipulate the market for Celsius’ proprietary CEL token.

Celsius filed for bankruptcy in July 2022. Mashinsky resigned as CEO two months later.

Since then, prosecutors have alleged that Mashinsky, 59, misled investors about Celsius’s financial health and manipulated the crypto market to benefit from inflated token prices.

This eventually led to halted customer withdrawals and a bankruptcy filing.

Mashinsky’s challenge

On Jan. 12, Mashinsky submitted an argument for dismissing the two criminal charges against him, contending that the dual charges for securities and commodities fraud are contradictory and incompatible.

Specifically, Mashinsky’s contention rested on the contradiction of treating Celsius’s Earn Program as a security under one count and a commodity under a second count. This duplicity in classification, as he argued, was not only illogical but also legally insupportable, with no precedent to charge the same contractual dealings as securities and commodities fraud simultaneously.

Additionally, he targeted the government’s lack of clarity and consistent stance on whether cryptocurrencies fall under the category of commodities or securities.

Moreover, in his defense, the former Celsius chief had questioned the reason behind another count focusing on alleged market manipulation. His criticism here was aimed at the lack of fair notice regarding the criminal nature of the conduct charged. 

He asserted the need for laws to be defined, enabling reasonable individuals to discern which actions are legally permissible and which are not, without risk of criminal indictment — a clarity he claims was absent from the actions for which he is being prosecuted.

Mashinsky also cited insufficient legal precedent to illustrate that such open-market transactions could be construed as criminal under the laws referenced, leaving him unfairly vulnerable to unwarranted criminal consequences.

Finally, he requested excluding any references to Celsius’ bankruptcy from his trial, suggesting these mentions are extraneous and prejudicial, lacking relevance to his actual charges. 

Notably, Mashinsky drew upon the broad implications of the term’ bankruptcy,’ which he believes invites unfavorable biases that could tarnish jury perception. According to him, the nuanced context of such a financial decision should not be reduced to a negative reflection of his conduct.

Prosecutors have challenged the assertion that the charges should be dismissed for lack of fair notice. They maintain that the statutes Mashinsky is charged under distinctly forbid the deceptive practices described, dismiss his claim of legal ambiguity, and contend that his actions were antithetical to a fair and free market.

Additionally, the government argued that references in the indictment to Celsius’s bankruptcy are pertinent and demonstrate the result of Mashinsky’s alleged fraudulent conduct.

Prosecutors are firm in their position, urging the court to deny Mashinsky’s motions. They contend that sufficient evidence and precedent exist to proceed with the case against the former CEO.

AG’s Celsius case will advance

In August, a Manhattan state court justice rejected another attempt by Mashinsky to dismiss a civil lawsuit accusing him of fraud, allowing a legal action by New York Attorney General Letitia James to advance.

Justice Margaret Chan bolstered James’ case, finding enough allegations to suggest Mashinsky’s statements potentially misled Celsius backers.

The lawsuit, initiated before Mashinsky’s federal charges, accused him of deception regarding investment security and risks, potentially influencing hundreds of thousands to invest billions in crypto assets.

Justice Chan’s verdict determined a probable link between the investor losses and the misrepresentations made about the financial soundness of Celsius.

Following the court’s decision, James indicated she was seeking significant penalties, including barring Mashinsky from executive roles or any securities-related activities within New York.