Former Celsius CEO Alex Mashinsky has moved to dismiss charges of commodities fraud and market manipulation, arguing contradictions in the government's case. Meanwhile, Sam Bankman-Fried's parents are fighting to dismiss a lawsuit alleging they exploited their son's position at FTX for personal gain. Terraform Labs' former CEO Do Hyeong Kwon's trial in the U.S. has been postponed to Mar. 25 due to delays in his extradition from Montenegro, where he's serving a sentence for a separate conviction.
Mashinsky’s Defense Challenges Crypto Fraud Charges
The crypto industry has seen its fair share of legal battles over the past few years, and there have already been a few updates in some of the high-profile cases in 2024. Former Celsius CEO Alex Mashinsky's legal team recently filed a motion in the United States District Court for the Southern District of New York, to dismiss charges against him. The motion, filed on Jan. 12, aims to drop two felony counts related to commodities fraud and market manipulation that Mashinsky is expected to face at his trial in September of 2024.
Mashinsky’s defense argues that the charges are contradictory, particularly pointing out the inconsistency in treating the Celsius Earn Program as both a security and a commodity. They contend that the government cannot simultaneously accuse Mashinsky of securities fraud and commodities fraud based on the same program. The legal team also requested the dismissal of the market manipulation charge, stating that it is an unfair criminalization of what should only be a civil violation.
In addition to these arguments, Mashinsky's lawyers also requested that any reference to Celsius’ bankruptcy be excluded from the trial. They argue that this particular information is irrelevant to the criminal charges and should not influence the case.
Celsius, along with other crypto firms like BlockFi and FTX, filed for bankruptcy in the United States in 2022 after a market downturn. Mashinsky resigned as CEO in September of 2022 and was later indicted on seven felony counts including securities fraud, wire fraud, and conspiracy to commit fraud in July of 2023. He is currently out on a $40 million bail.
This case unfolds against a backdrop of other high-profile legal actions in the crypto industry. Sam Bankman-Fried, former CEO of FTX, was convicted of seven felony counts in November of 2023 and was found guilty on all charges. Meanwhile Changpeng Zhao, the former CEO of Binance, pleaded guilty to a felony count and is under restrictions in the U.S. until his sentencing in February.
The Bankman-Fried Courtroom Drama
Former FTX CEO Sam Bankman-Fried's parents, Joseph Bankman and Barbara Fried, are currently in the middle of a legal battle to dismiss a lawsuit filed by FTX against them. The lawsuit accuses them of knowingly benefiting from misconduct at FTX and exploiting their positions to enrich themselves. This legal action stems from the very dramatic collapse of the crypto exchange FTX.
The lawsuit, filed in September, alleges that Bankman and Fried used their access and influence within FTX to their own advantage, negatively impacting the FTX bankruptcy estate. However, the couple has vehemently denied these accusations. Their primary defense hinges on the argument that their relationship with their son, Sam Bankman-Fried, does not constitute a legal basis for the claims made against them. They stand firm in their belief that being parents of the former FTX CEO is not actionable by law.
In a recent court filing, their attorneys from Montgomery McCracken Walker & Rhoads pointed out that the lawsuit attempts to leverage the mere fact of their familial connection. They further argue that the lawsuit fails to provide substantial evidence of any fiduciary relationship between Bankman and FTX or a plausible breach of such a relationship. The attorneys also made sure to point out that allegations must be backed by concrete facts, not just conclusions, to hold up in court.
The lawyers have called for the dismissal of the claims against both parents under Federal Rule of Civil Procedure 12(b)(6) and Federal Rule of Bankruptcy Procedure 7012(b), citing a failure to state a viable claim.
While these legal proceedings are underway, FTX has been attempting to recover millions in cash and gifts, including a $16.4 million villa in the Bahamas, believed to be linked to the couple. The defense for Bankman and Fried has countered this by stating that the Bahamas property, dubbed the “Blue Water” villa, was used by FTX employees for business purposes. They also argue that a $10 million cash gift from Sam Bankman-Fried's personal account, made at a time when FTX was valued at billions, does not imply self-interest on the part of Joseph Bankman.
The lawsuit against Bankman-Fried's parents includes claims of breach of fiduciary duty and fraudulent transfers, stemming from the larger context of the FTX collapse and its ongoing ramifications in the crypto industry. The case continues to unfold, with the parents fighting to clear their names against the backdrop of their son's troubled crypto empire.
Terraform's Kwon Faces Delayed Trial in U.S.
Meanwhile, the trial of Terraform Labs' former CEO, Do Hyeong Kwon , has been postponed to Mar. 25, after complications related to his extradition from Montenegro. Initially scheduled for Jan. 29, a few complications popped up from uncertainties surrounding Kwon's release from Montenegro, where he is currently serving a sentence for a separate conviction.
Kwon faces charges from the U.S. Securities and Exchange Commission (SEC) regarding the collapse of the algorithmic stablecoin Terra USD. He was arrested last year in Montenegro for traveling with forged documents and has since faced legal battles there.
Despite Kwon's agreement to be extradited, his lawyers, in a Jan. 11 request, expressed doubts about the likelihood of his extradition before February or March. They stated that the process is slowed by multiple requests and the complexities of Kwon's ongoing sentence in Montenegro. His legal team has reportedly been striving to expedite the extradition process.
In the U.S., Judge Jed Rakoff of the Southern District of New York agreed to the postponement, acknowledging the logistical challenges. However, he warned that the trial could not be further delayed beyond the new March date.
In a separate development, Judge Rakoff ruled in favor of the SEC last month on their claim that Kwon and Terraform Labs sold unregistered securities. This ruling was part of a broader legal action involving Terraform Labs, with the court siding with the company on certain other claims.
