US Prosecutors Call for Hearing Amid Potential Conflict of Interests in Alex Mashinsky and SBF Cases

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Jimmy Aki

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Jimmy Aki

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February 8, 2024 13:51 EST

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The US government raised concerns about potential conflicts of interest in the ongoing criminal cases of FTX and Celsius Network founders Sam Bankman-Fried and Alex Mashinsky on February 6. The area of concern surrounds the legal representatives handling both cases.

In a court filing, the US government outlined its concerns to Judge Lewis Kaplan in the Celsius and FTX cases and their founders.

Alex Mashinsky and SBF Legal Team Present Headaches

In the document, the US prosecutors requested a Curcio hearing to address a conflict of interests in both cases. The decision ensued upon the identification of Marc Mukasey and Torrey Young as legal counsels representing Celsius Network founder Alex Mashinsky, and Sam Bankman-Fried (SBF), the disgraced CEO of FTX.

Prosecutors have raised a potential conflict with Sam Bankman-Fried's recent retention of defense attorney Mark Mukasey: he also represents Alex Mashinsky, the founder of alleged FTX/Alameda victim Celsius Network. pic.twitter.com/Mf83086KhO

— Rachel Scharf (@rscharf_) February 6, 2024

The two attorneys were said to have previously filed a notice of appearances for SBF on January 9 and now represent Alex Mashinsky. Given this, the prosecuting team has requested a hearing for the defendants to waive their rights to be represented by the attorneys.

Additionally, the core objective of the Curcio hearing is for the court to determine the severity of the conflict and how to proceed. The court could dismiss both counsels if a major conflict of interest is identified.

The court can, however, take no further action if such a conflict doesn’t exist. Regardless, the prosecutors have suggested that appointing additional counsel to the case could resolve the issue, or the defendants can dismiss their legal team.

For context, a Curcio hearing is often deployed in the US legal system to maintain a defendant’s right to ‘conflict-free’ counsel. ‘Conflict-free counsel’ is a fancy term for counsel whose sole loyalty is in the defendant’s best interests.

To ensure this, the presiding Judge often poses focused inquiries to the defendant to unearth hidden facts. These can include inquiries about who manages the legal fees and whether the defendant is aware of any potential conflict of interest.

Celsius and FTX’s Prior Relationship Could Hurt Down The Line

During its heyday, Celsius Network operated as a decentralized finance (DeFi) lending protocol that allowed users to deposit their digital assets and earn variable rewards on their tokens.

The company went under in 2022 following a series of macroeconomic and broader market downtrends, however.

In the ongoing legal case with the US government, Celsius’ founder Mashinsky has admitted lending funds to FTX subsidiary Alameda Research.

In return, Alameda Research paid back these loans using customers’ funds. Given that Alameda Research, FTX, and Celsius are standing trial for criminal charges, US prosecutors have stated that this could present a strong ground for conflict of interest.

If legal materials could cause rifts between both parties, the current legal representatives will be limited in sharing such information. Both defendants were found guilty of multiple criminal charges involving fraud and promoting unregistered security tokens. SBF is set for a trial sentencing on March 28.

Meanwhile, SBF’s parents have filed a motion to dismiss a lawsuit originating from the FTX exchange. Under new management, the crypto exchange said that his parents were involved in the company’s financial mismanagement after its collapse in November 2022.

In response, the attorneys representing SBF’s parents have labeled the lawsuit ‘threadbare,’ arguing that their involvement is based on the assumption of their relationship with their son.