Celsius founder pushes to toss FTC suit after $4.7B settlement

Alex Mashinsky, the founder and former CEO of crypto lender Celsius, has filed a motion to have the Federal Trade Commission (FTC) drop its case against him.

In his court filing, Mashinsky’s lawyers argue that the allegations against him do not support a claim that he knowingly made a misstatement to fraudulently obtain customer information from a financial institution, as required under the Gramm-Leach-Bliley Act.

This motion to dismiss follows a similar one filed by Mashinsky’s co-defendant and Celsius co-founder, Hanoch “Nuke” Goldstein. Goldstein’s argument focuses on the FTC’s failure to allege a violation of an FTC rule and places some blame on Mashinsky and others at Celsius for the alleged misconduct described in the FTC’s complaint.

Goldstein also contends that the FTC’s settlement with Celsius, announced earlier in the summer, permanently bars the “alleged misconduct.”

“Mashinsky was responsible for leading almost all of the acts of misconduct alleged in the Complaint, including conducting weekly marketing and advertising videos called ‘Ask Mashinsky Anything,” Goldstein’s filing reads.

Furthermore, Mashinsky’s lawyers point out that he resigned from his position as CEO of Celsius in September (though a typo in the court document mistakenly says 2023), and therefore, the FTC’s complaint cannot substantiate a claim that he is currently violating or about to violate the law.

The FTC’s complaint against Mashinsky and Goldstein alleges violations of the Gramm-Leach-Bliley Act, which pertains to consumer financial privacy. However, both defendants argue that the original FTC complaint fails to allege a violation of this act.

Mashinsky also faces a lawsuit from the Department of Justice (DOJ), and a recent unsealed motion revealed that the government froze his assets in August.

The FTC and the bankrupt lender settled for $4.7 billion in July, limiting the lender from engaging in business practices related to crypto assets. Incidentally, the amount coincidentally matches the approximate debt Celsius owes to 1.7 million customers whose funds were frozen when the exchange ceased withdrawals last year.

As part of the settlement, Celsius will be permanently prohibited from engaging in the offering, marketing, or promotion of any product or service that facilitates the deposit, exchange, investment, or withdrawal of assets.

According to the FTC, the settlement amount will not be paid until Celsius returns the remaining customer assets through the ongoing bankruptcy proceedings. To facilitate this, Celsius is anticipated to sell its altcoin holdings or convert them into Bitcoin or Ether, a process that is expected to take place this month.