Alex Mashinsky, former CEO of Celsius Network, was sentenced to 12 years for fraud. He misled customers about the safety of their investments, inflating token value, causing massive losses. Federal prosecutors sought a 20-year sentence, highlighting the extensive financial damage. In addition to prison time, he faces supervised release and forfeiture of over $48 million.
Alex Mashinsky, the former CEO and founder of Celsius Network, has been sentenced to 12 years in prison after pleading guilty to securities and commodities fraud. This verdict, delivered by US District Judge John Koeltl in Manhattan, marks one of the longest sentences linked to the crypto market collapse of 2022. Mashinsky’s case stands out as notable in the context of the wider fallout from the crash, which saw numerous influential figures facing scrutiny.
Mashinsky, age 59, misled his customers regarding the security of their investments with Celsius, ultimately inflating the value of its proprietary token, Cel. Federal prosecutors initially sought a much heftier prison term of at least 20 years, deeming it a fair response to the massive financial damage caused, which affected thousands of individuals and resulted in billions lost. They pointed out that Mashinsky also personally benefited to the tune of over $48 million.
US Attorney Jay Clayton stated, “The case for tokenization…is strong but it is not a license to deceive.” In contrast, Mashinsky requested a lighter sentence of just one year and one day, expressing remorse for his actions and a desire to make amends to both his family and the clients who were impacted by the Celsius debacle.
Along with the prison term, Mashinsky’s sentence includes three years of supervised release and a forfeiture of $48.4 million. After the sentencing, lawyers representing Mashinsky did not immediately respond to inquiries for commented.
Celsius Network was established in 2017 and was based in Hoboken, New Jersey. The company sought Chapter 11 bankruptcy protection in July 2022 after a wave of customers requested withdrawals amidst declining cryptocurrency values. This rapid loss of trust ultimately led to its downfall.
Born in Ukraine, Mashinsky emigrated with his family to Israel, and later moved to New York following a trip in 1988. His career, marked by the promise of easy loans and high interest rates for depositors, has come under criticism as the crypto lending model has faced increasing scrutiny.
Celsius had boasted interest rates as high as 17% on deposits but ultimately recorded a staggering $1.19 billion deficit on its balance sheet by the time it filed for bankruptcy. This case has also opened the floodgates for various civil lawsuits against Mashinsky from regulatory bodies including the Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Trade Commission, and New York Attorney General Letitia James.
