Mashinsky is one of several crypto moguls accused of fraud in 2022 after a collapse in prices led to the collapse of firms.
Alex Mashinsky, the founder and former CEO of cryptocurrency lender Celsius Network, has pleaded guilty to two counts of fraud in the United States.
Mashinsky, 59, was indicted on July 13, 2023 on seven counts of fraud, conspiracy and market manipulation. Federal prosecutors in Manhattan said Celsius misled customers to persuade them to invest and artificially inflated the value of his company’s proprietary crypto token. He pleaded not guilty after that day.
On Tuesday, during a hearing before US District Judge John Koeltl, Mashinsky said he pleaded guilty to two of the seven counts he was initially charged with: commodity fraud and a fraudulent scheme to manipulate the price of Celsius’ internal token, CEL.
In court, Mashinsky admitted giving Celsius “false comfort” to customers by giving an interview in 2021 in which he said Celsius had received approval from regulators for its “earn” program. The Earn program allowed users to deposit cryptocurrencies like Bitcoin, Ethereum and Tether and receive weekly interest payments, yielding 18 percent annually.
He said he failed to disclose that he had sold his holdings of CEL.
“I know what I did was wrong, and I want to try to do what I can to fix it,” Mashinski said.
As part of his plea deal with prosecutors, Mashinski agreed not to appeal any sentence of 30 years or less — the maximum he faces for two counts.
Mashinsky is one of a number of crypto moguls accused of fraud after the collapse in crypto prices in 2022 led to the collapse of several companies, including the now bankrupt exchange FTX.
Prices of digital assets Bitcoin has risen since thenThis is 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 would allow the business to continue operating while working on a plan to repay its creditors – in July 2022 as customers began withdrawing deposits as crypto prices plummeted. Many were initially unable to access their funds. The company emerged from bankruptcy on January 31 and turned to Bitcoin mining.
Crypto lenders like Celsius grew rapidly during the Covid pandemic as crypto prices soared. They promised easy credit access and eye-popping interest rates to depositors, then issued tokens to institutional investors, promising to profit from the difference.
Celsius is the first in a series of bankruptcies in the cryptocurrency sector in 2022, as token prices crater 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.
Federal prosecutors in Manhattan accused Mashinsky and Celsius’ former chief revenue officer Ronnie Cohen-Pavon of manipulating the market for the company’s crypto token. Cohen-Pavon pleaded guilty in September 2023 and agreed to cooperate with prosecutors’ investigation.
Prosecutors said Mashinsky personally received about $42 million in proceeds from selling holdings of the CEL token.
Sam Bankman-Fried, the founder of FTX, was convicted in November 2023 of stealing nearly $8 billion from the exchange’s customers and sentenced to 25 years in prison in March.
