Bank accounts and real estate assets linked to Alex Mashinsky, the co-founder and former CEO of Celsius, have been frozen, according to court documents that were recently unsealed.
The development comes as the criminal case against the Celsius co-founder progresses, which accuses Mashinsky of misleading investors and operating a risky investment fund.
Mashinsky was released from jail on a $40million bond after his arrest in July.
On 16 August, New York Judge Jed Rakoff issued an order to stop financial institutions from selling assets in several Goldman Sachs bank accounts. These accounts were under the name of Koala LLC.
A residential property in Austin, TX, was also included in the freeze.
The order put a halt to any indirect transfers, sales, or assignments of these assets from Mashinsky.
The government initially kept this order sealed. This was to prevent any third-party interference before the relevant institutions could be informed. The need to keep this secret came after concerns the accounts could be drained if not frozen.
But, a new court filing on 5 September said: “The relevant institutions are now aware of the Order, and we do not believe that further sealing is required.”
Celsius’ downfall
Celsius Network, founded in 2017, was once an integral part of the crypto world. At its peak, it boasted more than 1.7 million customers and managed assets worth $25billion.
But as the crypto market took a downturn, the company’s trading practices came under scrutiny. This eventually led to its downfall.
The company declared Chapter 11 bankruptcy on 14 July 2022. This left many depositors uncertain about the future of their assets on the lending platform.
This period also saw several financial regulators in the US raise red flags about Celsius. The concerns ranged from the platform’s securities offerings to allegations that Mashinsky had made misleading statements.
In September 2022, Mashinsky stepped down as CEO. He stated that his position had become an “increasing distraction”, especially as users grappled with “difficult financial circumstances”.
Reports said that Celsius was approximately $2.8bn in debt.
Lawsuit against Mashinsky
The US Justice Department indicted Mashinsky at the end of 2022, as well as Celsius and the former chief revenue officer, Roni Cohen-Pavon. The charges were mainly related to fraud.
In January 2023, the New York attorney general took legal action against Mashinsky. The lawsuit accused the former CEO of making a series of “false and misleading statements”, which allegedly resulted in massive investor losses.
By July, both the Securities and Exchange Commision (SEC) and the Commodity Futures Trading Commission (CFTC) had announced civil cases against Mashinsky.
Mashinsky was arrested on 13 July. Soon after his arrest, an indictment revealed Celsius was operating “as a risky investment fund”, which was far less effective and profitable than the crypto platform had led investors to believe.
The Celsius co-founder was later released on a $40m bond.
Prosecutors indicated that they will require six to eight weeks to compile evidence. This includes online videos where Mashinsky is believed to have misled investors.
