Crypto Depositor’s Claims Against Ex-Celsius CEO Dismissed by Massachusetts Court
On Sunday, March 31, 2024, the United States District Court for the District of Massachusetts dismissed a lawsuit against cryptocurrency company Celsius Network’s former CEO Alexander Mashinsky for lack of personal jurisdiction.
The lawsuit was filed by Valentin Komarovskiy, a cryptocurrency depositor who claimed he was wrongfully deprived access to approximately $478,000 worth of various cryptocurrencies he had deposited with Celsius Network. In June 2022, Celsius instituted a pause on all customer withdrawals, freezing Komarovskiy’s funds.
Komarovskiy sued Celsius, Mashinsky, and former COO Shlomi Leon, alleging they misrepresented Celsius’ financial condition in the lead up to the freeze. Specifically against Mashinsky, the claims included unjust enrichment, conversion of cryptocurrency assets, tortious interference, and fraud and misrepresentation.
Mashinsky filed a motion to dismiss, arguing the court lacked personal jurisdiction over him as a resident of New York. In her ruling, District Judge Margaret Guzman said Komarovskiy failed to provide sufficient evidence showing Mashinsky’s alleged unlawful acts occurred within Massachusetts.
For the claims of unjust enrichment, conversion, and tortious interference, Judge Guzman found no evidence the purported torts caused injury through an act or omission in Massachusetts, as required by the state’s long-arm statute. Komarovskiy did not show where these acts might have taken place, such as the location of Celsius’ cryptocurrency storage systems.
Regarding the fraud and misrepresentation allegation, Judge Guzman noted Komarovskiy provided no specific details of the purported misleading statements by Mashinsky. Without knowing the content, author, audience, or timing of any communications, the judge said she could not determine if personal jurisdiction would be proper under the standard that fraudulent messages sent into Massachusetts could establish jurisdiction.
While Komarovskiy was not required to submit affidavits or other evidence, Judge Guzman emphasized plaintiffs must prove jurisdiction with more than just allegations in their complaint. Since the long-arm statute was not satisfied, the court did not need to conduct a constitutional analysis of jurisdiction.
The ruling demonstrates the challenges for plaintiffs seeking recourse against corporate officers from other states. Komarovskiy will have to pursue his case in New York if he wants to continue claims directly against Mashinsky.
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