Celsius Founder Alex Mashinsky Sentenced to 12 Years for Fraud

Alex Mashinsky, founder of Celsius Network, was sentenced to 12 years in prison for fraud. He misled customers about financial stability, leading to billions lost during the 2022 crypto downturn. Prosecutors sought a longer sentence, citing deception and personal gain. Legal defence argued he was caught off-guard by market changes, but the judge listened to victims’ calls for accountability. This case reflects ongoing scrutiny of the crypto industry amid recent regulatory shifts.

Alex Mashinsky, the founder of Celsius Network, was sentenced to 12 years in prison for orchestrating a fraudulent scheme that misled hundreds of thousands of customers enticed by attractive interest rates on digital deposits. Federal prosecutors had hoped for a 20-year sentence, citing Mashinsky’s lack of remorse during the proceedings. The sentence, handed down by US District Judge John Koeltl in Manhattan, follows Mashinsky’s guilty plea last December.

Celsius gained significant traction during the 2022 crypto boom, claiming it was as safe as a traditional bank, but with much higher returns. At its peak, the firm boasted around $25 billion in assets. However, the crypto market faced a sharp downturn, leading to financial instability for many, including Celsius, which declared bankruptcy in July 2022, just a month after it halted customer withdrawals citing liquidity issues. This period, often referred to as the “crypto winter,” resulted in customers losing access to over $5 billion in assets, although some funds have since been recovered.

In his plea, Mashinsky admitted to misleading customers about the company’s financial wellbeing during his regular YouTube sessions, particularly in his “Ask Mashinsky Anything” videos. He was also found to have engaged in methods to manipulate the value of Celsius’ CEL token, from which he allegedly profited around $42 million.

Mashinsky’s defence presented him as a father of six who was simply caught off guard by the downturn in crypto markets. They argued that he never intended to deceive anyone. He attended court openly emotional, expressing regret and calling his misleading comments “inexcusable,” claiming his intention was to protect his loyal customers from potential losses.

The prosecution painted a starkly different picture, describing his actions as a calculated “campaign of lies and self-dealing.” They pointed to the nearly 200 letters from victims submitted ahead of sentencing, many insisting on a severe punishment for Mashinsky’s role in their losses. They described his deceitful behaviour as a calculated path to enrich himself at the expense of many who trusted him.

Mashinsky’s case comes amid changing attitudes towards crypto regulation with the current Biden administration, which has slowed down on such prosecutions in favour of a more lenient approach towards the crypto industry. However, the Justice Department still vowed to pursue cases that involve outright fraud against investors, signalling the ongoing scrutiny faced by crypto figures amid a turbulent market landscape.

The case is formally recorded as US v. Mashinsky, 23-cr-00347, in the Southern District of New York, marking a significant development in the fallout from the dramatic rise and fall of the cryptocurrency sector.