Alex Mashinsky, the founder and former CEO of failed cryptocurrency lending platform Celsius Network, pleaded guilty to two counts of fraud. Mashinsky will be sentenced in April and could face decades in prison.
Mashinsky was indicted on July 13, 2023, on seven counts of fraud, conspiracy, and market manipulation charges.
Mashinsky Pleads Guilty
According to federal prosecutors in Manhattan, Mashinsky misled Celsius customers, persuaded them to invest, and artificially inflated the value of his firm's proprietary token. During a hearing before US District Judge John Koeltl, Mashinsky said he pleaded guilty to two out of the seven counts he was initially charged with in 2023: commodities fraud and a fraudulent scheme to manipulate the price of the CEL token and secretly sell it at inflated prices, pocketing $48 million.
Mashinsky also admitted to giving Celsius customers false hope by stating in an interview that Celsius had regulatory approval for its “Earn” program, which it did not. Celsius’ Earn program allowed customers to deposit their assets and earn yield through investments. Mashinsky also failed to disclose he had been selling his CEL tokens. The former CEO stated in court,
“I accept full responsibility for my actions. I know what I did was wrong, and I want to try to do whatever I can to make it right.”
As part of a plea deal with prosecutors, Mashinsky agreed not to appeal any sentence of 30 years or less, the maximum he currently faces. The former Celsius CEO will be sentenced on April 8, 2025.
Significant Gains
Federal prosecutors stated that Mashinsky made millions, accumulating $42 million in proceeds from selling his CEL tokens, leaving customers in the lurch when the firm went bankrupt. Damian Williams, the US Attorney in Manhattan, stated,
“Mashinsky made tens of millions of dollars selling his own CEL at artificially high prices, while his customers were left holding the bag when the company went bankrupt.”
Williams said Mashinsky orchestrated one of the biggest frauds in crypto as Celsius grew to a valuation of $25 billion at its peak and became one of the largest crypto platforms in the world. He also used catchy slogans like “unbank yourself” to entice customers with the promise that their funds will be as safe in a crypto account as they would in a bank account. Meanwhile, Mashinsky and his co-conspirators used customer deposits to fund purchases of the CEL token and bump up its price.
Before pleading guilty, Mashinsky was scheduled for trial on January 28. Following the hearing, Mashinsky’s defense lawyer stated,
“Sometimes, accepting responsibility when and where appropriate is the best way to help everybody move on.”
The Celsius Bankruptcy
Celsius was founded in 2017 and filed for Chapter 11 bankruptcy protection in July 2022 after customers rushed to withdraw their deposits as crypto prices crashed. The company exited bankruptcy in January and pivoted to Bitcoin mining. The firm grew rapidly during the COVID-19 pandemic, promising customers easy access to loans and significant interest rates to depositors, and then lent the tokens to institutional investors, hoping to pocket the difference.
Mashinsky was one of many figures from the crypto ecosystem to be charged with fraud following a collapse in crypto prices, causing several major firms, including FTX, to collapse.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
