Alex Mashinsky, the founder and former CEO of bankrupt crypto lending company Celsius, is seeking to have the Federal Trade Commission (FTC) drop its case against him “in its entirety.”
In a court filing Monday, Mashinsky’s lawyers contended that the allegations do not support a claim that he knowingly made misstatements to fraudulently obtain customer information from a financial institution.
Specifically, Mashinsky’s legal team, represented by Yankwitt LLP, argued that the accusations do not satisfy the requirements for a claim under the Gramm-Leach-Bliley Act (GLBA). This 1999 law mandates that knowingly false statements be made in order to fraudulently obtain customer information from a financial institution.
The lawyers further argued that “in addition to the fact that Celsius is in bankruptcy and entered into a settlement agreement with the FTC…, the Complaint cannot substantiate a claim that Mashinsky ‘is violating’ or is ‘about to violate’ the law because Mashinsky resigned from his position as CEO of Celsius in September 27, 2023.”
The FTC lawsuit, filed in July 2023, also included Celsius’ co-founders Shlomi Daniel Leon and Hanoch “Nuke” Goldstein, with the latter also contesting the charges brought against him.
Goldstein asserted that the FTC is unjustly attributing responsibility to him based on his association with other executives from Celsius.
“Additionally, Mashinsky joins in Section III(A)(2) of Goldstein’s Motion to Dismiss, which establishes that the FTC has not stated a claim for monetary relief under the GLBA,” reads the filing. “Accordingly, the Court should grant Mashinsky’s motion and dismiss the Complaint against him in its entirety.”
According to lawyers, the FTC appears to be building its case against Goldstein primarily on the basis of his retweet of a blog post by Celsius. Goldstein argues that this action is being misinterpreted as a form of complicity or involvement in the alleged wrongdoing.
At the same time, U.S. Attorney Damian Williams petitioned the court on Monday to temporarily suspend the FTC proceedings to prevent any potential prejudice to the concurrent criminal case involving Mashinsky.
Mashinsky has previously pleaded not guilty to multiple counts of fraud and manipulating the price of CEL, the native token of the Celsius platform, charges his legal team has described as “baseless.”
Celsius’ downfall
Celsius Network once held a prominent position in the global digital asset landscape, claiming to oversee a staggering $25 billion in assets under management as of October 2021. It allowed users to deposit various digital assets, including Bitcoin and Ethereum, to earn a percentage yield and take out loans by pledging their cryptocurrencies.
Celsius filed for bankruptcy last year during the crypto market downturn, followed by Mashinsky’s arrest in July, exactly one year after the business went bust. He was later released on bail after agreeing to a $40 million personal recognizance bond.
The 57-year-old entrepreneur resigned as Celsius CEO in September 2022, stating at the time that he was “very sorry about the difficult financial circumstances members of our community are facing.”
In addition to the FTC, Celsius Network and the firm’s former execs have been sued by the U.S. Department of Justice (DOJ), the Securities and Exchange Commision (SEC), and the Commodity Futures Trading Commission (CFTC).
Last month, the DOJ also moved to freeze Mashinsky’s assets, including numerous bank accounts and a Texas property.
