Judge denies ex-Celsius CEO’s bid to dismiss fraud, manipulation charges

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Alex Mashinsky’s jury trial scheduled for September 2024

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Celsius creditors vote in favor of reorganization plan

September 26, 2023 Coin Telegraph

Alex Mashinsky

The majority of Celsius creditors have voted in favor of a plan that will see approximately $2 billion worth of Bitcoin and Ethereum returned to creditors.

The creditors involved in the Celsius bankruptcy case have voted in favor of a plan that will see funds returned to them as well as distributing equity through a new company.

According to a Sept. 25 filing from bankruptcy firm Stretto, most of the classes voted in favor of the plan by more than 98%.

The voting results are in! Over 95% of creditors across all eligible classes voted to accept the Plan, a testament to our collaborative efforts during Chapter 11. https://t.co/9Z5xlBhNts @CelsiusUcc @FahrenheitHldg.
— Celsius (@CelsiusNetwork) September 25, 2023

While voters have made a near-unanimous decision on the plan, the plan still needs final approval at a confirmation hearing in the United States Bankruptcy Court for the Southern District of New York scheduled for Oct. 2.

*Celsius network creditor class vote breakdown. Source: Stretto*

According to a disclosure statement filed on Aug. 17, the current plan will see approximately $2 billion worth of Bitcoin (BTC) and Ether (ETH) redistributed to Celsius Network creditors. The plan will also distribute equity in a new company, temporarily dubbed “NewCo.”

“NewCo will operate and further build out the Debtors’ Bitcoin mining operations, stake Ethereum, monetize the Debtors’ other illiquid assets, and develop new, value-accretive, regulatory-compliant business opportunities," it wrote.

Notably, the new company will be managed by the Fahrenheit Group — a consortium of crypto-native individuals and organizations including former Algorand CEO Steven Kokinos, venture capital firm Arrington Capital, crypto miner US Bitcoin Corp, Proof Group Capital Management and Arrington Capital advisor Ravi Kaza.

Celsius Network was one of the first major casualties of the 2022 bear market, with the now-defunct crypto lender filing for bankruptcy on July 14, 2022.

On July 13, 2023, the SEC sued Celsius and its former CEO Alex Mashinsky for allegedly raising billions of dollars through unregistered and fraudulent offers involving “crypto asset securities.”

Mashinsky was then arrested on the same day, following an indictment from the U.S. Department of Justice, which accused the former CEO of fraudulent financial activity, misleading investors and a number of other similar charges.

Magazine: How to protect your crypto in a volatile market — Bitcoin OGs and experts weigh in

Celsius Network files ‘adversary complaint’ against EquitiesFirst

September 7, 2023 Coin Telegraph

Alex Mashinsky

Bankrupt crypto lender Celsius Network is attempting to recover assets from a private lender called EquitiesFirst Holdings, which reportedly owes $439 million in cash and crypto.

Bankrupt crypto lender Celsius Network has filed a complaint against lending firm EquitiesFirst Holdings in a bid to recoup assets.

According to a sealed adversary complaint filed on Sept. 6, Celsius is seeking injunctive relief and a declaratory judgment associated with the "recovery of money/property" — according to the title of the docket.

The filing named both EquitiesFirst and its CEO Alexander Christy as defendants. Additionally, Celsius filed a summons on the same day, requiring that the private lender provide a motion or answer within 35 days.

*The sealed adversary complaint filed against EquitesFirst Holdings. Source: Stretto*

EquitiesFirst Holdings is an Indianapolis-based private lending company that reportedly owed Celsius Network $439 million as of July 2022.

Celsius first began taking collateralized loans from EquitiesFirst in 2019 to “support its operations” owing to what Alex Mashinsky described in a subsequent bankruptcy filing as a “lack of institutional lending available to cryptocurrency companies,” at the time.

However, in July 2021, Celsius Network sought to retrieve the collateral it had pledged to EquitiesFirst but was informed that the lender could not return the amount Celsius had provided.

As of July 2021, Celsius was owed a total of $509 million by EquitiesFirst. The increase from $439 million to $509 million was due to the loans being over-collateralized. Since September 2021, the debt has been slowly repaid at a rate of $5 million per month.

As of July 2022, EquitiesFirst owed Celsius $439 million, with the debt being comprised of $361 million in cash and 3,765 Bitcoin (BTC).

Celsius Network was among the major casualties of the 2022 bear market, filing for Chapter 11 bankruptcy protection on July 14, 2022.

Celsius’ former CEO Alex Mashinky was arrested on July 13 this year, with authorities accusing him of misleading Celsius users and defrauding investors out of billions of dollars.

Notably, The Federal Trade Commission issued Celsius with $4.7 billion in fines for allegedly “duping” users, but suspended the judgement in order for the platform to use the assets as part of its bankruptcy proceedings.

Celsius creditors are currently voting on a settlement plan that — if approved — would see a consortium called Fahrenheit buy Celsius’ assets and return Celsius creditors funds by way of launching a new company.

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Alex Mashinsky’s assets frozen by US court as part of criminal case

September 6, 2023 Coin Telegraph

Alex Mashinsky

The former Celsius CEO was arrested on July 13 and faces criminal and civil charges stemming from his involvement in the now-defunct platform.

A federal judge has ordered that certain bank accounts and property connected to former Celsius CEO Alex Mashinsky be frozen following a motion from the United States Justice Department.

According to a Sept. 5 filing in U.S. District Court for the Southern District of New York, a judge signed off on a request to unseal a restraining order related to Mashinsky’s assets. The Justice Department can freeze accounts at Goldman Sachs and Merrill Lynch under the names of holding companies as well as accounts at First Republic Securities, SoFi Bank and SoFi Securities under Mashinsky’s name.

Mashinsky’s property in Austin, Texas — which he purchased with his wife, Kristine, in 2021 — was also included in the order. The house had been listed for sale for more than a year, around the time Celsius filed for bankruptcy in July 2022.

This Austin house is being sold by Alex Mashinsky, founder and CEO of bankrupt crypto company Celsius. He bought it only a year ago.https://t.co/TYbGmYEGq4 pic.twitter.com/7OACiuAwZN
— Austin Ideas (@atxideas) August 6, 2022

Mashinsky, who co-founded the crypto lending platform Celsius in 2017, stepped down as CEO in September 2022, saying at the time his role had become an “increasing distraction” amid users facing “difficult financial circumstances.” The firm had already been a target by officials at the state and federal level for allegedly offering unregistered securities.

In July, U.S. authorities arrested Mashinsky, alleging the former CEO misled Celsius investors and defrauded users out of billions of dollars. He pleaded not guilty to all charges and was released on $40-million bail, subject to restrictions including electronic monitoring and not withdrawing, transferring or receiving more than $10,000 without prior approval.

The U.S. Commodity Futures Trading Commission and Securities and Exchange Commission both filed civil cases against Mashinsky in July, announcing settlements with Celsius amid the former CEO’s criminal and civil charges. The Federal Trade Commission also issued $4.7 billion in fines to Celsius for allegedly “duping” users, but suspended the judgement in order for the platform to use the assets as part of its bankruptcy proceedings.

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Weekend Wrap: Celsius’ Mashinsky fraud suit is on, Tether class suit dismissed and more

August 7, 2023 Coin Telegraph

Alex Mashinsky

The former Celsius CEO has been denied a lawsuit dismissal, Tether celebrates a minor court victory and China vows to crack down on telecoms fraud using crypto and AI.

Celsius' Mashinsky motion to dismiss denied

The former chief executive of crypto lending platform Celsius Network, Alex Mashinsky is back on track to face a civil fraud lawsuit after a Supreme Court judge denied his motion to dismiss the case.

A court order issued on Aug. 4 by New York County Supreme Court Justice Margaret Chan denied Mashinsky’s motion to dismiss the suit originally brought by New York Attorney General, Letitia James in January.

Screenshot from denial filing. New York v. Mashinsky, New York State Supreme Court. No. 450040/2023. Source: courts.state.ny.us

Celsius filed for Chapter 11 bankruptcy on July 14, 2022, and Mashinsky resigned as CEO in September of that year.

Mashinsky's response argued the complaint failed to state a "legally-cognizable" claim against Mashinsky and is otherwise deficient, among other arguments.

However, Judge Chan argued there were sufficient allegations to support a plausible inference that Mashinsky's misstatements induced new investors to deposit in Celsius' earn accounts.

The judge has denied the motion to dismiss and has also ordered Mashinsky to file an answer to the complaint within 30 days of the order.

The CFTC and SEC issued their own civil cases against Mashinsky in July amid the former CEO’s criminal charges. Moreover, the Federal Trade Commission (FTC) issued $4.7 billion in fines to Celsius for allegedly “squandering billions in user deposits” after “duping” users.

Judge dismisses Tether class action suit

Stablecoin issuer Tether has lauded a legal victory after a U.S. District Court dismissed a class action lawsuit regarding its reserves on Aug. 4.

Judge Laura Taylor Swain of the U.S. District Court for the Southern District Of New York issued an order dismissing the class action lawsuit filed by Matthew Anderson and Shawn Dolifka in 2021.

The complaint claimed that the defendants did not maintain the same amount of reserves as Tether tokens in circulation.

It's a good Friday.#Tether and @Bitfinex Win Comprehensive Legal Victory as U.S. District Court Dismisses Class Action Lawsuit

The Court correctly held that plaintiffs’ complaint lacked any “plausible allegations of injury” because it includes no facts showing that “USDT had a…
— Paolo Ardoino (@paoloardoino) August 4, 2023

Reporting on the result, Tether stated “The dismissal of the entire class action at this very early stage of the proceedings underscores the fact that the plaintiffs’ claims lacked any legal merit.”

Tether CTO Paolo Ardoino called it a “good Friday.”

China cracks down on telecom fraud, targeting crypto

The Chinese government has reportedly announced plans to crack down on overseas telecom fraud, and has pointed the finger directly at crypto and artificial intelligence.

On Aug. 6 local media reported that the Commission for Political and Legal Affairs of the Communist Party of China (CPC) Central Committee has issued the warning.

crypto and AI fraudsters after China announced aggressive measures to tackle fraud pic.twitter.com/08aqR1HDkn
— web3 guy (@memefloor) August 7, 2023

It specifically stated that it would be targeting new methods used by cyber criminals including blockchain, metaverse, cryptocurrencies, and artificial intelligence.

The announcement followed recent reports of Chinese nationals being subjected to telecoms fraud involving “virtual kidnapping.” Scammers have been impersonating public security personnel to dupe victims into divulging personal information which has led to extortion and ransoms.

Worldcoin touts user growth

Weekly global World ID verifications more than doubled in the seven days following the launch of retina-scanning digital ID platform Worldcoin, according to an Aug. 6 announcement from the firm.

It added that there was a threefold increase in weekly active World App users and more than ten times the weekly account creations in the seven days following the launch. Worldcoin claims to have over 2 million users.

“Last week's 2X growth in weekly World ID sign-ups demonstrates a sustained increase in global demand for World ID as a standalone product,” it said.

In the days following the Worldcoin launch, World App downloads hit record highs around the world. pic.twitter.com/K4iV6llPfR
— Tools For Humanity (@tfh_technology) August 3, 2023

However, on Aug. 4 Cointelegraph reported that Worldcoin’s Orb had serious a security vulnerability in operator onboarding according to CertiK.

Also making news

The Huobi crypto exchange has been reporting large outflows over the weekend amid ongoing concerns and rumors regarding its solvency. Additionally, Chinese authorities have been reportedly investigating its executives.

On Aug. 5 Elon Musk quashed rumors of a token launch for his recently rebranded micro-blogging platform X (formerly known as Twitter). The tech entrepreneur said there will “never” be a token launch despite unrelated altcoins being pumped and dumped by degens.

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