Former CEOs of Celsius and FTX share legal representation for fraud charges
Alex Mashinsky, the former CEO of Celsius Network, has chosen to proceed with legal representation that is also representing Sam Bankman-Fried, despite potential conflicts of interest. This decision was communicated to a U.S. Federal Judge during a court hearing this week.
The potential conflict arises from the lawyers’ choice to represent Sam Bankman-Fried, the former CEO of FTX, during his sentencing following his conviction. Both former CEOs face charges in the aftermath of their firms’ collapse in 2022, which resulted in significant market losses.
Bankman-Fried was charged with misappropriation and theft of consumer assets, while Mashinsky, (pictured above on left), was accused of misrepresenting his company’s health prior to its bankruptcy filing. Despite these fraud-related charges, Mashinsky decided to retain the services of the lawyers.
Mashinsky stated that he understands the potential conflict of interests, even though he doesn’t believe one exists. He emphasized his significant investment of time and money in his legal representation and disclosed that he had consulted with an independent attorney regarding conflict of interest concerns.
Interwoven business relationships
US prosecutors expressed concerns about potential conflicts of interest in both criminal cases. They requested a Curcio hearing in a court filing to resolve pending issues. During such hearings, the court assesses the extent of the identified conflict of interest and may order a change of attorneys if a conflict is found. This process ensures that a client receives the best representation without divided loyalties if the cases are connected.
Prosecutors have drawn parallels between the two defendants, noting that both had business relationships prior to their firms’ collapse. Mashinsky admitted to lending funds to Alameda Research, a subsidiary and sister company of FTX, and partially attributed Celsius’s collapse to Alameda Research’s actions before FTX’s bankruptcy. Prosecutors also highlighted discussions about Bankman-Fried purchasing Celsius and replacing Mashinsky as CEO as potential areas of conflict.
However, the government stated that these issues do not infringe on his rights and can be waived with his explicit consent. The judge postponed the matter to hear from an attorney appointed to represent defendants on potential conflict cases under the Criminal Justice Act. In related news, Bankman-Fried is expected to appear in court before District Judge Lewis Kaplan on similar issues tomorrow.
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