Alex Mashinsky, the former CEO and co-founder of the now-defunct cryptocurrency lender Celsius Network, pleaded guilty to fraud charges in Manhattan federal court on Tuesday. The case marks a milestone in the legal fallout from the collapse of several high-profile cryptocurrency platforms in 2022, a period widely known as the “crypto winter.”
“I knew what I did was wrong, and I want to do whatever I can to make it right,” Mashinsky, 59, admitted to U.S. District Judge John Koeltl.
Mashinsky’s guilty plea included two counts: commodities fraud and engaging in a scheme to manipulate the price of Celsius’s native cryptocurrency, the CEL token. The charges could carry up to 20 years in prison. His sentencing is scheduled for April 8, 2025.
Founded in 2017, Celsius Network promised its users high interest rates on cryptocurrency deposits, presenting itself as a revolutionary alternative to traditional banking. By 2022, the company claimed to hold $30 billion in assets and boasted hundreds of thousands of customers.
Celsius’s downfall began with the collapse of the TerraUSD stablecoin in May 2022, which triggered a cascade of losses across the cryptocurrency market. In June of that year, the platform abruptly froze customer withdrawals, leaving $4.7 billion in deposits inaccessible. Just a month later, Celsius filed for bankruptcy, revealing a $1 billion deficit.
Federal prosecutors, the Securities and Exchange Commission, and the Commodity Futures Trading Commission accused Mashinsky of systematically deceiving customers and manipulating the market for CEL tokens.
Investigators allege that Mashinsky falsely presented Celsius as a secure investment platform while concealing its precarious financial health. Prosecutors also claim that Celsius used millions of dollars in customer funds to artificially inflate the value of CEL tokens, creating the illusion of stability and growth.
“The issue is that people are selling and no one is buying except for us,” Celsius’s Chief Revenue Officer Roni Cohen-Pavon reportedly told Mashinsky in private communications.
Cohen-Pavon, who pleaded guilty in 2023 and is cooperating with prosecutors, revealed that Celsius spent approximately $8 million weekly to sustain the token’s price, using customer funds without disclosure.
Throughout 2021 and 2022, Mashinsky promoted Celsius aggressively, hosting a series of “Ask Mashinsky Anything” online forums. Prosecutors highlighted numerous instances where Mashinsky made misleading statements, including claims that the company had received regulatory approval it did not possess.
“Celsius lied to investors by presenting itself as a safe investment opportunity and a chance to gain financial freedom,” Gurbir Grewal, director of the SEC’s Enforcement Division, said in a statement earlier this year.
Mashinsky also allegedly sold $42 million worth of his own CEL tokens at inflated prices, further enriching himself while leaving customers vulnerable to the platform’s eventual collapse.
Mashinsky’s guilty plea comes in the wake of other high-profile crypto prosecutions, including the conviction of Sam Bankman-Fried, founder of FTX, who is currently serving a 25-year prison sentence for fraud.
Legal experts suggest that Mashinsky’s case underscores the urgent need for clearer regulations in the cryptocurrency space. “The lack of regulatory oversight allowed firms like Celsius to operate with little accountability, leaving retail investors at enormous risk,” said Ian McGinley, Director of Enforcement at the CFTC.
The court is now accepting victim impact statements, which may influence Mashinsky’s sentencing. Thousands of Celsius customers suffered significant financial losses, with many losing life savings due to the platform’s abrupt collapse.
While Celsius’s assets have since been acquired by crypto consortium Fahrenheit, many victims remain skeptical about recovering their funds.
Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
