Ex-Celsius CEO Alex Mashinsky Pleads Guilty to Fraud Charges in Crypto Lender Scandal

Alex Mashinsky, founder of the now-bankrupt Celsius Network, announced Tuesday that he intends to plead guilty to fraud charges.

He pleaded guilty to two charges: one for commodities fraud and another for manipulating the price of the Celsius token. The most serious charge carries a potential 20-year prison sentence.

On July 13, 2023, Mashinsky faced indictment on seven charges, including fraud, conspiracy and market manipulation. He initially declared himself not guilty on the day of the indictment, but has since reversed his plea.

The Justice Department said Mashinsky committed securities fraud tied to two separate schemes. In one, Mashinsky misled Celsius customers about key aspects of the company, including its financial stability and how it managed customer funds, the department said.

In the other, he secretly manipulated the CEL token’s market while selling his own holdings at inflated prices. Under his plea deal, Mashinsky agreed to forfeit over $48m in profits from these illegal activities to the Justice Department.

Ex-Celsius CEO Admits to Fraud, Faces Up to 30 Years in Prison

In court, Mashinsky admitted to misleading Celsius customers by giving them “false comfort.” He acknowledged falsely stating in a 2021 interview that Celsius had regulatory approval for its Earn program, which used customer crypto assets to generate returns. Mashinsky also confessed to failing to disclose his personal sale of CEL tokens, the company’s token.

“I knew what I did was wrong and I want to do whatever I can to make it right,” Mashinsky said to US District Judge John Koeltl. “I accept full responsibility for my actions.”

Mashinsky agreed with prosecutors not to appeal any sentence of 30 years or less, the maximum penalty for the two counts he admitted to. Koeltl is scheduled to sentence him on April 8, 2025.

US Attorney Says Mashinsky Ran One of the Largest Crypto Scams in History

“Alexander Mashinsky orchestrated one of the biggest frauds in the crypto industry,” said US Attorney Damian Williams. “He lured ordinary, retail crypto investors into investing billions of dollars in Celsius with false promises that their investments were low-risk.”

“To disguise the flaws in his business model, Mashinsky put investors’ money into riskier and riskier bets, and secretly used customer money to prop up the price of CEL token. Mashinsky made tens of millions of dollars selling his own CEL at artificially high prices, while his customers were left holding the bag when the company went bankrupt.”

Under Mashinsky’s leadership, Celsius initially thrived by offering high interest rates on digital-asset deposits. However, the firm faced financial trouble after the TerraUSD stablecoin collapse and a subsequent downturn in crypto markets, which left it unable to meet overwhelming withdrawal requests.

Celsius’s 2022 collapse became a defining moment in the crypto sector, marking the onset of the “crypto winter.” This period saw a steep decline in digital asset values, erasing billions from the market. Alongside other major failures, such as Sam Bankman-Fried’s FTX, Celsius’s downfall deepened the broader crisis within the crypto industry.

Creditors have received about $3b so far, covering both the initial and second distributions. Most payouts are being made in cryptocurrency.

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