Crypto Courtroom Chronicles: This Week's Major Legal Developments
Federal investigators discover another $10 million linked to Sam Bankman-Fried, Alex Mashinsky dismisses his attorneys ahead of sentencing, and Washington state enacts legislation prohibiting cryptocurrency ATMs.
Former Celsius CEO Alex Mashinsky chooses self-representation ahead of upcoming sentencing
Legal counsel for Alex Mashinsky filed a motion on Wednesday seeking permission to withdraw from the case, indicating that the former chief executive of Celsius would be "proceeding pro se" — acting as his own legal representative in court proceedings. The former CEO received a 12-year prison term for his involvement in fraudulent activities and market price manipulation at the cryptocurrency lending institution.
The sentencing hearing for Roni Cohen-Pavon, who served as Celsius' former chief revenue officer, is set for May 13 following a guilty plea entered in September 2023. Federal prosecutors submitted a filing on May 4 requesting that the presiding judge take into account Cohen-Pavon's "substantial assistance" to authorities during sentencing, which suggests a potentially reduced sentence.
The crypto lending platform Celsius, together with digital asset exchange FTX, both declared bankruptcy in 2022 during a widespread cryptocurrency market crash that resulted in numerous corporate failures.
Spokane Valley in Washington enacts crypto kiosk prohibition, Iowa implements new restrictions
The Spokane Valley city council in Washington state passed an ordinance on Tuesday with unanimous approval that bans virtual currency kiosks and automated teller machines. This prohibition, put forward after numerous local residents fell victim to cryptocurrency-related fraudulent schemes, mirrored similar legislative actions taken by many other local governments.
Under the terms of the ordinance, individuals or businesses failing to comply face a $250 civil fine, while municipal officials gain authority to cancel business licenses of any operators discovered to be violating the ban. Companies and venues currently hosting these kiosks and ATMs are given 30 days to achieve compliance.
The legislative action taken by Spokane Valley came before Iowa Attorney General Brenna Bird's announcement on Wednesday that her state would "establish rigorous oversight for crypto ATMs" as a protective measure for state residents against fraudulent actors. The legislation, known as SF2296, incorporates crypto kiosks into Iowa's existing financial regulatory structure, authorizing state regulators to levy civil fines and seek injunctions against violating operators.
Federal prosecutors seek forfeiture of $10 million in assets linked to Sam Bankman-Fried
Prosecutors handling the criminal prosecution of Sam "SBF" Bankman-Fried submitted a filing on Thursday to the US District Court for the Southern District of New York, requesting that $10 million in recently discovered assets be applied to the former FTX chief executive's forfeiture obligations.
US Attorney Jay Clayton of SDNY submitted a forfeiture motion following the discovery by authorities of $10 million in cash connected to SBF maintained in an account at Fiduciary Trust Company. Clayton stated that these funds constituted "the return of the investment made by [Bankman-Fried] in Semafor."
After his conviction and receiving a 25-year prison sentence, Bankman-Fried faced an order to pay in excess of $11 billion in forfeiture as restitution for his role in perpetrating fraud against FTX customers and investors. Clayton indicated that the judgment "remains unpaid" while SBF continues to wait for the outcome of an appeal.