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Mashinsky was one of several crypto tycoons accused of fraud after a price crash in 2022 caused companies to collapse.
Alex Mashinsky, the founder and former CEO of cryptocurrency lender Celsius Network, has pleaded guilty to two counts of fraud in the United States.
Mashinski, 59, was indicted on July 13, 2023, on seven counts of fraud, conspiracy and market manipulation. Federal prosecutors in Manhattan said he misled Celsius customers to persuade them to invest and artificially inflated the value of his company’s proprietary cryptographic token. He pleaded not guilty later that day.
At a hearing Tuesday before U.S. District Judge John Colt, Mashinsky said he pleaded guilty to two of the seven counts he was originally charged with: commodity fraud and a fraudulent scheme to manipulate the price of Celsius’ internal token, CEL.
In court, Mashinsky admitted he had given Celsius customers “false comfort” by giving an interview in 2021 in which he said Celsius had received regulatory approval for its “Earn” program, but had not. The Earn program allowed users to deposit cryptocurrencies such as Bitcoin, Ethereum and Tether and receive weekly interest payments, offering as much as 18 percent per year.
He also did not disclose that he had sold his CEL shares, he said.
“I know what I did was wrong and I want to try to do everything I can to make it right,” Mashinsky said.
As part of a plea deal with prosecutors, Mashinski agreed not to appeal any sentence of 30 years or less he faces on both counts.
Mashinsky was one of several crypto tycoons accused of fraud after the fall in cryptocurrency prices in 2022 led to the collapse of several companies, including the now-bankrupt exchange FTX.
Prices for digital assets, e.g Since then, Bitcoin has been on the risedue in part to optimism about US President-elect Donald Trump’s upcoming cryptocurrency-friendly policies.
Founded in 2017, Celsius filed for Chapter 11 bankruptcy protection in the U.S., which allows the company to continue operating while it works on a plan to repay creditors, in July 2022 after customers rushed to withdraw deposits as cryptocurrency prices fell. Many were initially unable to access their funds. The company emerged from bankruptcy on January 31 and has focused on Bitcoin mining.
Crypto lenders like Celsius surged as cryptocurrency prices surged during the COVID pandemic. They promised depositors easy access to loans and impressive interest rates, then lent the tokens to institutional investors, hoping to profit from the spread.
Celsius was one of the first in a series of bankruptcies in the cryptocurrency sector in 2022, when token prices soared amid rising interest rates and stubbornly high inflation. The company filed for bankruptcy shortly after Singapore-based crypto hedge fund Three Arrows Capital and rival crypto lender Voyager Digital did.
Federal prosecutors in Manhattan charged Mashinsky and Celsius’ former chief revenue officer, Roni Cohen-Pavona, with manipulating the market for the company’s cryptographic token. Cohen-Pavon pleaded guilty in September 2023 and agreed to cooperate with the prosecutor’s investigation.
Prosecutors have said Mashinsky also personally made about $42 million in revenue from the sale of CEL tokens he owned.
Sam Bankman-Fried, the founder of FTX, was convicted of stealing approximately $8 billion from the exchange’s clients in November 2023 and was sentenced to 25 years in prison in March.
