A federal court has issued an order to freeze the assets and bank accounts of Alex Mashinsky, the former CEO of Celsius, a cryptocurrency lending platform that recently filed for bankruptcy. The court filing on September 5 revealed that a judge in the Southern District of New York granted the request to freeze Mashinsky’s assets as the criminal case against him proceeds.
The motion to freeze Mashinsky’s assets was initially filed by the Department of Justice on August 16 but was kept confidential due to concerns that the named assets might be moved outside the court’s jurisdiction.
Assets Subject to Freeze
According to the court filing, Mashinsky will lose control of funds held in several bank accounts, including those with Goldman Sachs, First Republic Securities, Merrill Lynch, SoFi Bank, and SoFi Securities. Additionally, a Texas property owned by Mashinsky and his wife, Kristine, has been frozen. This property, acquired in 2021, was put up for sale last year when Celsius filed for bankruptcy.
Fraud Allegations and Legal Action
In July, federal authorities arrested and charged Mashinsky with fraud, accusing him of misleading investors about the financial health of Celsius and engaging in risky trading practices. The Department of Justice alleged that Mashinsky sold unregistered securities, deceived investors, and falsely promoted Celsius as a safe banking alternative while personally profiting by approximately $42 million.
Both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) also filed civil lawsuits against Mashinsky for his central role in the scandal, which resulted in liabilities exceeding $1.2 billion.
Despite pleading not guilty and securing his release on a $40 million bail bond, along with restrictions on financial transactions and electronic monitoring, the prosecution intends to present substantial evidence to prove its case beyond a reasonable doubt. They have requested six to eight weeks to compile adequate evidence.
Celsius Creditors’ Hopes for Restructuring
As Mashinsky faces multiple criminal and civil charges, creditors of the failed lending platform are eager to secure a favorable restructuring plan as the bankruptcy case unfolds. Creditors are currently voting on a potential asset sale to the Fahrenheit Group, which would enable them to recover a portion of their investments.
Celsius had 600,000 creditors with claims totaling $4.4 billion at the time of its bankruptcy filing. The proposed deal would see the troubled lender returning some crypto assets to customers, with Earn Account holders potentially receiving up to 67% through direct crypto distributions, shares in the new entity, and other arrangements.
