New York Permanently Bars Alex Mashinsky From Crypto Industries

New York Attorney General Letitia James has secured a settlement permanently barring former Celsius CEO Alex Mashinsky from doing business in the securities, commodities and cryptocurrency industries, while making up to $35 million payable to the state if he fails to meet two conditions. The New York Attorney General’s announcement, dated October 9, says the settlement resolves James’ 2023 lawsuit against Mashinsky.

The settlement follows Celsius’ collapse and separate federal criminal proceedings. Mashinsky is serving a 12-year prison sentence after pleading guilty to commodities and securities fraud. New York’s resolution adds a permanent industry bar and conditional payments; it does not replace that sentence or the separate federal forfeiture order.

What triggers the $35 million in payments?

The settlement sets out two separate conditional payments to New York, rather than an unconditional $35 million fine. According to James’ office, Mashinsky must pay $25 million to the state if he fails to forfeit $10 million in ill-gotten gains to the federal government under his plea agreement. He must pay another $10 million to New York if he does not serve his full prison sentence, as mandated by the criminal court and overseen by the Bureau of Prisons.

The two conditions make the stated $35 million a maximum amount tied to failures to comply. The Attorney General’s announcement does not say that Mashinsky has already paid that sum to New York. It also distinguishes the settlement’s conditions from assets already forfeited to the federal government. Separately, New York says Mashinsky was ordered in the federal case to forfeit more than $48 million.

What does the permanent industry bar cover?

The settlement permanently bars Mashinsky from doing business in the securities, commodities and cryptocurrency industries. James’ announcement does not specify a narrower list of roles, products or transactions. The practical effect described by the state is a prohibition on his participation in those industries, alongside his federal prison term.

The New York action is distinct from a June consent order resolving the Commodity Futures Trading Commission’s 2023 enforcement case. The CFTC said that order permanently enjoined Mashinsky from further violations of certain anti-fraud provisions in the Commodity Exchange Act and CFTC regulations, and imposed permanent trading and registration bans. Those are specific federal restrictions; New York’s settlement separately bars industry participation under state enforcement.

What conduct did New York’s case address?

New York’s 2023 lawsuit alleged that Mashinsky misled investors about Celsius’ safety to encourage deposits. Celsius let customers deposit cryptocurrency in exchange for promised yields, and the Attorney General says the platform used investor assets in risky strategies, concealed losses and failed to register Mashinsky as a salesperson and as a securities and commodities dealer under state law.

The Block’s report on the settlement notes that Celsius creditors have received more than $3.4 billion through bankruptcy proceedings. That distribution is separate from the payments in the New York settlement. The settlement’s central mechanism is personal: it restricts Mashinsky’s future industry activity and makes payments contingent on his compliance with the federal forfeiture and prison terms.

References

• New York Attorney General’s announcement — ag.ny.gov
• Block’s report on the settlement — theblock.co