Alex Mashinsky, the founder and former CEO of the now-defunct crypto lending platform Celsius, is seeking to overturn his 12-year prison sentence, according to a new motion filed in the District Court for the Southern District of New York.
Grounds for Appeal
The motion, handwritten by Mashinsky, cites ineffective counsel and the “fruit of a poisonous tree” doctrine as grounds for vacating the sentence.
Mashinsky, who pleaded guilty to charges of commodities and securities fraud, included additional materials to support his claims, stating that his counsel’s ineffectiveness stemmed in part from “financial duress resulting in unavoidable and absolute conflict of interest with client.”
“The root of counsel’s deficiencies lay in the undisclosed financial distress of the firm Mukasey & Young LLP,” Mashinsky’s motion for habeas corpus relief states. “This distress created a conflict of interest that permeated every strategic decision made by counsel since the outset of the petitioner’s representation.”
Alleged Conflict of Interest
This conflict of interest arose from the firm’s engagement with FTX founder and former CEO Sam Bankman-Fried, also known as SBF. Mashinsky claims this created an “unwaivable conflict since it was market manipulation of the CEL token and StETH by SBF” that harmed Celsius. Celsius subsequently paused withdrawals, leaving customers unable to access billions of dollars in deposits.
Shortly after halting withdrawals, Celsius was forced to file for bankruptcy in an attempt to stabilize its business. A year later, Mashinsky was arrested and charged by the SEC, CFTC, and FTC. Some charges alleged he defrauded customers of $42 million.
He later pleaded guilty, reportedly stating in court, “I know what I did was wrong, and I want to try to do whatever I can to make it right.”
Despite some creditors seeking harsher penalties, Mashinsky was sentenced to 12 years in prison. He is now seeking to have that sentence vacated.
Recent Settlement
Last month, Mashinsky was formally banned from the cryptocurrency industry as part of a $10 million settlement with the FTC. The regulator initially secured a $4.7 billion judgment against him, though the majority of the judgment has been suspended, requiring only the $10 million payment.
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