A federal court has ordered assets and bank accounts belonging to Alex Mashinsky, the former CEO of bankrupt crypto lender Celsius to be frozen.
A court filing on Sept 5 revealed that a judge in the Southern District of New York signed off the request to freeze Mashinksy’s assets as the criminal case proceeds.
The motion initially filed by the Department of Justice on Aug 16 was kept secret due to fears of the named assets moved outside the court’s jurisdiction.
Per the filing, Mashinsky loses control of funds in several bank accounts including Goldman Sachs, First Republic Securities, Merril Lynch, SoFi Bank, and SoFi Securities.
A Texas property owned by the defendant and his wife, Kristine was also a subject of the freeze. The property was purchased in 2021 and placed for sale last year when the company filed for bankruptcy.
Prosecutors allege fraud
In July, the Feds arrested and charged Mashinsky with fraud alleging amongst others that he misled investors on the financial strength of Celsius and engaged in “risky trade practices.”
According to the Justice Department, he sold unregistered securities, lied to investors, and “falsely touted Celsius as a safe alternative to banking,” while taking home about $42 million.
The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission also filed civil suits against Machinsky for his role at the center of the scandal which led to liabilities going over $1.2 billion.
As the bankruptcy case garnered steam, the Federal Trade Commission suspended a judgment on a $4.7 billion fine imposed on the company as such assets would be deployed to settle creditor claims.
Machinsky pleaded “not guilty” to the charges with his lawyers describing them as baseless. He was subsequently released on a $40 million bail bond and other restrictions including financial transactions not exceeding $10,000 without approval and electronic monitoring.
Despite this, the prosecution has stressed that its case would be proved beyond reasonable doubt requesting six to eight weeks to file adequate evidence.
What’s next for Celsius and its creditors?
As ex-CEO Mavhinky faces multiple criminal and civil charges, creditors of the collapsed lender are hoping to get the perfect restructuring plan as the bankruptcy case proceeds.
Creditors of the company are voting on a potential sale of assets to Fahrenheit Group, a move which will see creditors recover some of their investments.
Per court documents, Celsius had 600,000 with $4.4 billion claims at the time it filed for bankruptcy. The proposed deal would see the embattled lender return some crypto assets to customers with Earn Account holders receiving up to 67% through direct crypto, shares in the new proposed entity, etc.
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