Introduction:
In 2018, Alexander Mashinsky founded Celsius Network, a crypto platform that he promoted as a secure place for depositing crypto assets to earn interest. The DOJ charges that Mashinsky operated Celsius through fraudulent means, misleading investors about its profitability and business practices.
The Government further alleges that he also manipulated the price of Celsius's proprietary token, CEL, for personal profit.
By mid-2022, Celsius faced severe financial issues, halting customer withdrawals and later filing for bankruptcy. Prosecutors charge that Mashinsky's fraud at Celsius involved two criminal schemes: one based on false statements to customers to attract investments, and another involving manipulative trading of the CEL token.
They allege he misrepresented Celsius's investment strategies, risk levels, and financial stability, falsely inflating CEL's price through substantial market purchases. The Government charges his manipulation, partly funded by customer assets, significantly raised CEL's price, allowing Mashinsky to profit immensely from his holdings, contrary to public claims of market independence and organic demand.
The indictment alleges that: (1) Mashinsky personally reaped approximately $42 million in proceeds from his sales of CEL; (2) At times, Mashinsky falsely claimed to the public that he was not selling CEL, when in reality he was taking advantage of the upward price manipulation he had orchestrated by contemporaneously selling huge quantities of his CEL on the market. (3) These sales violated Celsius’s insider trading policy, which Mashinsky had signed, and which forbade him from selling CEL in excess of $20,000 per day or $50,000 per week.
Defendant's Motion to Dismiss: Mashinsky contends that Count Two (commodities fraud) is inconsistent with Count One (securities fraud), claiming a single scheme can't be both. He also argues that Count Six (market manipulation) lacks clarity, potentially violating fair notice requirements. Memo in Support of Motion to Dismiss
Government Response to Motion to Dismiss: The prosecution refutes Mashinsky's claims, insisting that Counts One and Two aren't mutually exclusive and can coexist, as the fraudulent actions relate to different aspects of the scheme. The prosecution emphasizes that an indictment need not detail all evidence, but must sufficiently inform the defendant of the charges to prepare a defense, and avoid double jeopardy. The government argues that Mashinsky's actions fall under commodities fraud as they involved deceptive practices related to Bitcoin, a recognized commodity. -The government counters Mashinsky's claim on Count Six, affirming that the indictment clearly outlines the alleged manipulative acts, providing ample notice to the defendant. Goverment’s Response
