Alex Mashinsky trial set for September 2024 as Celsius proposes customer refunds by year-end

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Alex Mashinsky is set for September 2024, potentially signalling the end for one of the industry’s biggest scandals.

In a hearing on October 3 in the Southern District of New York, Judge John Koeltl revealed that there would be three pre-trial conferences in March, July, and September before the criminal trial on September 17, 2024.

Mashinsky was at the helm of digital asset lender Celsius Network when it collapsed in mid-2022 and filed for bankruptcy last July. A year later, he was arrested and charged with fraud and market manipulation through his platform’s native token, CEL. He pleaded not guilty and was released on a $40 million bond.

Judge Koeltl ruled that Mashinsky would remain free on this bond until his sentencing next year. However, most of his assets remain frozen, and his movement is greatly restricted.

During the hearing, his lawyers hinted that their strategy hinges on arguing that digital assets aren’t securities. As such, the charges against Mashinsky lack a legal basis as existing securities laws don’t cover digital assets.

“The law about what is a security is fluid,” his attorney, Robert Frenchman, stated during the hearing.

As Mashinsky awaits for his trial, his firm has proposed restructuring as a new entity to refund most of the investor funds. Legal counsel Chris Koenig told the court during an October 2 bankruptcy hearing that Celsius proposes to reorganize as NewCo, a new entity that would receive $450 million in funding from a group of companies.

The group is led by Fahrenheit, a consortium led by Arrington Capital, the digital asset investment firm founded by TechCrunch founder Michael Arrington. For committing $50 million of its capital to NewCo, Fahrenheit would be compensated in common stock.

NewCo would have no funded debt and would be listed on Nasdaq to maximize liquidity, the filing says.

“Notably, the Plan provides for a distribution of at least $2.03 billion of cryptocurrency to creditors, subject to fluctuations in the cryptocurrency market, on or as soon as reasonably practicable.”

Not everyone is on board, however. According to the filing, there have been 12 formal objections from interested parties, including the U.S. Trustee and the Securities and Exchange Commission (SEC). There have also been 12 informal objections and two reservations.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.