Celsius Founder Alex Mashinsky Pleads Guilty to Two Fraud Charges

Alex Mashinsky, Celsius Network's creator and former CEO, has pled guilty to two charges of fraud including market manipulation and consumer deception. Mashinsky, 59, was charged in July 2023 on seven counts of fraud and conspiracy after federal prosecutors in Manhattan accused him of defrauding investors in order to artificially increase the value of Celsius's own cryptocurrency token, CEL.

Mashinsky acknowledged two crimes, commodities fraud and illegally manipulating the price of CEL, at a hearing on Tuesday. The allegations came from his false representation in 2021 that Celsius' “Earn” program had been approved by authorities. Customers may deposit cryptocurrencies such as Bitcoin, Ethereum, and Tether under this scheme, which promises yearly interest rates of up to 18%.

Mashinsky allegedly omitted to disclose that he had been selling CEL tokens while promoting the initiative. “I know what I did was wrong, and I want to do everything I can to make it right,” Mashinsky said in court.

Mashinsky accepted a sentence of up to 30 years in prison with no chance of appeal as part of his plea deal. This plea follows a string of fraud allegations against high-profile crypto moguls in the aftermath of the 2022 cryptocurrency market meltdown, which caused firms like FTX to declare bankruptcy.

Celsius Network, which was founded in 2017, filed for Chapter 11 bankruptcy protection in July 2022 following a large surge in client withdrawals as the value of cryptocurrency collapsed. The firm had promised substantial profits but was unable to meet client withdrawal demands. Celsius emerged from bankruptcy in January 2023, and its concentration moved to Bitcoin mining.

During the cryptocurrency bubble, companies like Celsius expanded swiftly by offering high-interest loans and allowing users to deposit bitcoins. However, as the market fell in 2022, many businesses, including Celsius, found themselves in financial trouble. Celsius was one of the first to declare bankruptcy, followed by Three Arrows Capital and Voyager Digital, which also failed.

According to federal prosecutors, Mashinsky personally benefitted by around $42 million from the sale of CEL tokens during this time. Roni Cohen-Pavon, Mashinsky's former chief revenue officer, pled guilty to identical allegations in September 2023 and is now helping with the inquiry.

Sam Bankman-Fried, FTX's founder, is facing similar legal issues after being convicted of cheating FTX clients out of almost $8 billion. In March 2024, he received a sentence of 25 years in jail.

Final Thoughts:

Mashinsky's guilty plea highlights the increased legal scrutiny of the bitcoin business by authorities and investors. While the market has recovered with rising asset values, the prosecutions against famous people such as Mashinsky and Bankman-Fried serve as sharp reminders of the dangers of the mostly unregulated cryptocurrency industry. The exact consequence of these legal disputes on the future of cryptocurrency firms is unknown.