Celsius Crypto Founder Loses Bid to Toss Some Fraud Charges

Former Celsius Network Ltd. Chief Executive Officer Alex Mashinsky lost his bid to strike two counts of his indictment alleging he artificially inflated the price of his company’s cryptocurrency.

US District Judge John G. Koeltl said in a ruling Nov. 8 that Mashinsky’s attorneys’ arguments against the charges are “either moot or without merit.”

Mashinsky’s attorneys with Mukasey Young LLP had pushed to dismiss a charge that he had violated the Commodity Exchange Act, arguing it couldn’t stand because he was also charged with violating the Securities Exchange Act of 1934 for effectively the same conduct. Koeltl, who sits on the US District Court for the Southern District of New York, rejected the motion, saying that a conviction on the securities charge wouldn’t force an acquittal on the commodities charge.

Koeltl also rejected an argument that the commodities charge is “legally insufficient” because prosecutors didn’t adequately allege that Celsius investors’ depositing Bitcoin into a program that promised weekly “rewards” payments were “contract[s] of sale of any commodity.” The judge said that is a factual question “that cannot be resolved at this stage.”

Mashinsky also lost a bid to toss another charge alleging market manipulation of Celsius’ proprietary token, arguing that he lacked “fair warning” that the alleged conduct was criminal.

Koeltl said that argument “is meritless.” He wrote that the US Court of Appeals for the Second Circuit has previously said that "[o]pen-market transactions that are not inherently manipulative may constitute manipulative activity when accompanied by manipulative intent.”

The district judge also said it wasn’t a proper time to determine whether references to Celsius’ bankruptcy should be struck from the indictment, saying it should be decided through pre-trial motions on evidence or trial.

Mashinsky was charged last year with wire fraud and other charges, after Celsius became one of several crypto exchanges to collapse in 2022. He has pleaded not guilty.

The case is United States v Mashinsky, S.D.N.Y., No. 23-cr-347, 11/8/24