Nikolas Sargeant
Alex Mashinsky must serve over a decade in prison for defrauding hundreds of thousands of crypto investors through his failed lending platform Celsius Network, marking a significant crackdown on digital asset misconduct.
Alex Mashinsky, the 59-year-old founder of collapsed cryptocurrency lender Celsius Network, has been sentenced to 12 years in prison after pleading guilty to defrauding hundreds of thousands of customers. US District Judge John Koeltl delivered the ruling Thursday in Manhattan federal court, establishing one of the most substantial penalties resulting from the wave of cryptocurrency platform failures that rocked the industry in 2022.
The sentence comes after Mashinsky's December guilty plea to two counts of fraud related to his leadership of Celsius, which had attracted billions in customer deposits by promising unusually high returns on cryptocurrency holdings.
Prosecution Sought Severe Punishment for "Calculated Deception"
Federal prosecutors had pushed for a 20-year prison sentence, describing Mashinsky as "unrepentant" and arguing that he continued to minimize his wrongdoing even after entering his guilty plea. They characterized his actions as deliberate deception rather than business misjudgment.
Mashinsky's defense team requested a significantly lighter one-year sentence, claiming he had accepted responsibility for his actions while arguing that Celsius' collapse was primarily caused by broader cryptocurrency market instability beyond his control.
Judge Koeltl rejected the defense's market forces argument, imposing a sentence that reflected the magnitude of fraud perpetrated against Celsius customers who trusted Mashinsky with their assets.
Banking Alternative Collapsed in Traditional Liquidity Crisis
Founded in 2017, Celsius Network marketed itself as a revolutionary alternative to traditional banking institutions, offering remarkable double-digit yields on cryptocurrency deposits. The platform attracted customers by allowing Celsius to lend their digital assets to institutional borrowers, promising returns far exceeding conventional financial products.
The business model successfully attracted billions in deposits until mid-2022, when deteriorating cryptocurrency market conditions and industry scandals triggered a classic bank run scenario. As panicked customers rushed to withdraw funds, Celsius froze all withdrawals in June 2022 before filing for Chapter 11 bankruptcy protection the following month, revealing significant financial shortfalls.
Fraudulent Practices Included Customer Fund Misuse and Market Manipulation
Court documents revealed that Mashinsky directed employees to use customer deposits to fund the platform's promised high yields while simultaneously making risky, unsecured loans that contradicted public statements about the company's conservative investment approach.
Prosecutors demonstrated that Mashinsky deliberately misled investors about Celsius' cryptocurrency reserves and falsely claimed he wasn't selling his personal holdings of the platform's CEL token while secretly liquidating millions worth. The company also engaged in systematic price manipulation of its token to maintain the appearance of financial stability.
Mashinsky ultimately admitted to lying about Celsius' financial condition to attract Bitcoin deposits and misleading investors about the CEL token's value. His 12-year sentence follows the 25-year prison term recently given to former FTX CEO Sam Bankman-Fried, who is currently appealing his conviction.
