Alex Mashinsky, founder of Celsius Network, has been sentenced to 12 years for fraud. He misled investors about the safety of assets and inflated the value of the Cel token, profiting $48 million. Fed prosecutions sought 20 years, but Mashinsky claimed remorse and asked for a lesser sentence. Civil lawsuits are pending against him as well from multiple regulators.
In a significant development for the cryptocurrency world, Alex Mashinsky, the founder of Celsius Network, has been sentenced to 12 years in federal prison. The former CEO was found guilty of securities and commodities fraud and entered his plea in December. Prosecutors accused him of artificially inflating the value of the Celsius’ Cel token, reaping over $48 million from these deceptive practices.
U.S. Attorney Jay Clayton, leading the prosecution, highlighted that while the case underlines the potential of tokenization and digital assets, it does not justify dishonest behaviours. He further noted that this deceptive tactic led thousands to suffer from substantial financial losses. Alongside the prison term, Mashinsky will face three years of supervised release and will forfeit the $48.4 million he garnered from his actions while at the helm of the company.
The prosecution initially sought a much harsher sentence of 20 years, arguing that Mashinsky’s actions resulted in billions lost for numerous investors. In contrast, Mashinsky requested a more lenient sentence of just over a year, expressing remorse over the consequences of his actions. The Celsius Network, based in Hoboken, New Jersey, had lured customers with promises of significant returns, offering up to 17% on deposits. However, when cryptocurrency prices saw a sharp decline in the summer of 2022, panic ensued, prompting customers to withdraw their funds.
This downward spiral culminated in Celsius seeking Chapter 11 bankruptcy protection in July 2022, revealing a staggering $1.19 billion balance sheet deficit. Notably, this 12-year sentence represents one of the most substantial punishments linked to the broader downturn of the crypto market following the infamous collapse of the FTX exchange. That exchange’s founder, Sam Bankman-Fried, is currently appealing a 25-year sentence for related fraud convictions.
Beyond the criminal charges, Mashinsky is also facing multiple civil lawsuits initiated by several regulatory bodies including the Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Trade Commission, and the office of New York Attorney General Letitia James. With the regulatory landscape tightening around crypto assets, this case serves as a stark warning to others in the industry.
