Alex Mashinsky, the founder and former CEO of Celsius Network, has admitted to orchestrating one of the largest frauds in the cryptocurrency industry.
In a New York federal court on Tuesday, Mashinsky pleaded guilty to commodities and securities fraud charges, acknowledging he misled customers and manipulated his company's crypto token for personal gain.
Celsius CEO Misled Investors, Pocketed $48M While Customers Faced Devastation
From 2018 to 2022, Mashinsky presented Celsius as a trustworthy platform where customers could safely deposit cryptocurrency and earn interest, likening it to a modern-day bank.
Using slogans like "Unbank Yourself," he reassured investors their funds were secure, AP News said.
However, prosecutors revealed that behind the scenes, Mashinsky and his co-conspirators were using customer deposits to artificially inflate the value of Celsius's proprietary token, CEL.
Mashinsky admitted he secretly sold his CEL tokens at these inflated prices, amassing approximately $48 million.
Despite publicly claiming he wasn't selling his holdings, Mashinsky confessed in court that he knowingly misled customers to give them "false comfort." By 2021, Celsius's reported assets reached $25 billion, making it one of the largest crypto platforms at its peak.
However, the company's operations unraveled in 2022, when Celsius filed for bankruptcy amid plummeting cryptocurrency prices and allegations of financial mismanagement.
Thousands of customers lost access to their deposits, leading to widespread outrage. Mashinsky's actions left many investors "holding the bag" while he profited, according to US Attorney Damian Williams.
Celsius Staff Warned of Fraud, Mashinsky Ignored Them as Scheme Unfolded
The court also heard that Celsius employees had raised concerns about Mashinsky's misleading statements during weekly "Ask Mashinsky Anything" sessions and other promotional activities. These warnings were ignored, allowing the fraudulent scheme to continue.
Under a plea agreement, Mashinsky faces up to 30 years in prison and must forfeit the $48 million he earned through his deceptive practices. His sentencing is scheduled for April 8, and he has agreed not to appeal any sentence of 30 years or less.
This case is part of a broader crackdown on fraudulent cryptocurrency schemes as authorities respond to the fallout from multiple high-profile collapses in the industry.
In 2022 alone, victims reported losing over $1 billion to crypto scams, according to the Federal Trade Commission.
According to Engadget, Mashinsky's guilty plea follows similar charges against other crypto leaders, including Sam Bankman-Fried of FTX.
Mashinsky stated in court that he takes full responsibility for his actions, but for many former Celsius customers, the damage caused by the platform's collapse may never be repaired.
