Alex Mashinsky, Founder of Bankrupt Crypto Lender Celsius Network, Pleads Guilty to Fraud

Alex Mashinsky, the founder and former CEO of cryptocurrency lender Celsius Network, has pleaded guilty in the United States to two counts of fraud.

Alex Mashinsky, the founder and former CEO of cryptocurrency lender Celsius Network, pleaded guilty on Tuesday to two counts of fraud in the United States, admitting he misled customers and manipulated the price of his company’s crypto token.

Mashinsky, 59, was initially indicted on July 13, 2023, on seven counts of fraud, conspiracy and market manipulation charges. Federal prosecutors in Manhattan said he misled Celsius customers to persuade them to invest, and artificially inflated the value of the company’s proprietary crypto token. He pleaded not guilty later that day.

During a hearing before US District Judge John Koeltl on Tuesday, Mashinsky pleaded guilty to two out of the seven counts he was charged with - commodities fraud and a fraudulent scheme to manipulate the price of CEL, Celsius’s in-house token.

In court, Mashinsky admitted to giving Celsius customers “false comfort” by giving an interview in 2021 in which he said Celsius had received approval from regulators for its “Earn” programme, which it had not. The Earn programme allowed users to deposit cryptocurrencies like Bitcoin, Ethereum and Tether and receive weekly interest payments, offering as much as 18 percent annually.

He said he also failed to disclose that he had been selling his holdings of CEL.

“I know what I did was wrong, and I want to try to do whatever I can to make it right,” Mashinsky said.

As part of his plea deal with prosecutors, Mashinsky agreed not to appeal any sentence of 30 years or less – the maximum he faces for the two counts.

Mashinsky was one of several crypto executives to be charged with fraud after a slump in crypto prices in 2022 caused a number of companies, including the now-bankrupt exchange FTX, to collapse.

Prices for digital assets like Bitcoin have since surged, in part due to optimism about US President-elect Donald Trump’s expected friendly policies towards cryptocurrency.

Founded in 2017, Celsius filed for Chapter 11 bankruptcy protection in the US – which allows a business to continue operating while it works on a plan to repay its creditors – in July 2022 after customers rushed to withdraw deposits as crypto prices fell. Many were initially unable to access their funds. The company exited bankruptcy on January 31, and has pivoted to Bitcoin mining.

Crypto lenders such as Celsius grew rapidly as crypto prices surged during the COVID pandemic. They promised easy loan access and eye-popping interest rates to depositors, then lent out tokens to institutional investors, hoping to profit from the difference.

Celsius was among the first in a series of bankruptcies in the cryptocurrency sector in 2022 as token prices cratered amid rising interest rates and stubbornly high inflation. It filed for bankruptcy shortly after Singapore-based crypto hedge fund Three Arrows Capital and rival crypto lender Voyager Digital did so.

Federal prosecutors in Manhattan accused Mashinsky and Celsius’s former chief revenue officer, Roni Cohen-Pavon, of manipulating the market for the company’s crypto token. Cohen-Pavon pleaded guilty in September 2023 and agreed to cooperate with the prosecutors’ investigation.

Prosecutors have said Mashinsky also personally reaped approximately $42m in proceeds from selling his holdings of the CEL token.

Sam Bankman-Fried, the founder of FTX, was convicted of stealing roughly $8bn from the exchange’s customers in November 2023 and sentenced in March to 25 years in prison.