Alex Mashinsky, founder of bankrupt crypto lender Celsius, 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.

Celsius Network founder Alex Mashinsky pleaded guilty on Tuesday to two counts of fraud in connection with the 2022 collapse of his cryptocurrency lending company, admitting that he lied to customers and manipulated the price of Celsius’s proprietary crypto token.

Mashinsky, 59, faces a maximum sentence of 30 years in prison after pleading guilty to one count each of commodities fraud and a fraudulent scheme to manipulate the price of CEL, Celsius’s in-house token, during a hearing before US District Judge John Koeltl.

As part of his plea deal with prosecutors, Mashinsky agreed not to appeal any sentence of 30 years or less. He also agreed to forfeit $42m, which prosecutors said he personally reaped from selling his holdings of the CEL token.

Prosecutors in Manhattan indicted Mashinsky on seven counts of fraud, conspiracy and market manipulation charges on July 13, 2023, accusing him of misleading Celsius customers to persuade them to invest, and artificially inflating the value of his company’s proprietary crypto token. He pleaded not guilty later that day.

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.

In court on Tuesday, 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.

Mashinsky 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.

Cohen-Pavon pleaded guilty in September 2023 and agreed to cooperate with the prosecutors’ investigation.

Prosecutors have said that Mashinsky 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.