DOJ Seeks Evidence In Fraud Case Against Celsius Founder Amidst $4.7B FTC Settlement

Key Points:

• DOJ requests time to gather evidence against Celsius founder for fraud charges.
• Celsius settles with FTC for $4.7 billion over investor deception.
• The trial date is pending, and if convicted, Mashinsky and a co-defendant could face lengthy prison sentences, making this a significant case in the crypto industry.

In a high-stakes legal battle, the U.S. Department of Justice (DOJ) has requested six to eight weeks from a federal judge to gather evidence against Alex Mashinsky, the founder and former CEO of cryptocurrency lending platform Celsius, CoinDesk reported.

The DOJ’s attorneys have cited the need to sift through a massive trove of corporate records and communications from Celsius, which includes over 1,200 videos of “ask-me-anything” sessions featuring Mashinsky and other executives, some lasting over an hour.

Mashinsky, who was taken into custody earlier this month, has entered a plea of not guilty to charges of securities fraud, commodities fraud, wire fraud, and conspiracy to manipulate the price of CEL, Celsius’ native token. His defense in court is led by lawyer Marc Mukasey.

Judge John G. Koeltl of the District Court for the Southern District of New York has set the next conference date for October 3rd, with the trial date yet to be determined. Koeltl had previously granted Mashinsky’s team additional time to comply with the conditions of his $40 million bail.

This recent arrest follows Mashinsky’s previous detention on July 13 on federal securities fraud charges, coinciding with the crypto exchange’s agreement to settle a $4.7 billion lawsuit with the Federal Trade Commission (FTC).

Celsius, along with Mashinsky, is also facing lawsuits from both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) on allegations of conspiring to defraud investors of substantial amounts.

Mashinsky faces a string of charges in Manhattan federal court, encompassing securities, commodities, and wire fraud, as well as various securities manipulation and fraud charges. If convicted, both Mashinsky and his co-defendant, Roni Cohen-Pavon, could be sentenced to decades in prison.

Celsius’ settlement with the FTC stands as one of the largest in the agency’s history, comparable to the record $5 billion fine imposed on Meta in 2019. This settlement comes as the FTC accuses Celsius and Mashinsky of engaging in repeated deceptive practices.

The terms of the settlement, announced by the FTC, dictate that the payment will be withheld until Celsius can return the remaining customer assets amidst ongoing bankruptcy proceedings.

In the charging document, the office of U.S. Attorney Damian Williams alleges that:

“Mashinsky misrepresented, among other things, the safety of Celsius’s yield-generating activities, Celsius’s profitability, the long-term sustainability of Celsius’ high rewards rates, and the risks associated with depositing crypto assets with Celsius.”

As the trial date looms, the outcome of this high-profile case could have significant implications for the crypto industry and its regulatory landscape. The court proceedings will undoubtedly be closely monitored by stakeholders and investors alike.

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