TLDR;
- Alex Mashinsky, former CEO of Celsius, pleaded guilty to fraud and market manipulation.
- He inflated the value of CEL token, profiting $42 million while customers lost billions.
- Celsius went bankrupt in 2022, freezing $4.7 billion in assets.
- Mashinsky faces up to 20 years in prison, but could get a lighter sentence.
- Celsius creditors will receive $127 million, and the company is suing Tether for $2 billion.
The co-founder and former CEO of Celsius Network, Alex Mashinsky, has pleaded guilty to charges of commodities fraud and of intentionally manipulating market prices. Celsius Network was a notable cryptocurrency lender company that went bankrupt in 2022 during a difficult time for the cryptocurrency market.
Alex Mashinsky was charged with seven counts of fraud and market manipulation on July 13, 2023. The federal prosecutors state that he intentionally misled Celsius customers to invest into the company’s crypto token, CEL. He artificially boosted the value of CEL so that no one would be skeptical when investing.
When he was initially indicted, Mashinsky pleaded not guilty. But now, on Tuesday, he pleaded guilty on two out of seven counts he was originally charged with before the U.S. District Judge John Koeltl. Mahinsky admitted to having committed commodities fraud and inflating CEL’s value artificially in order to attract investors. As a result of all these fraudulent schemes, he himself profited $42 million and Celsius customers lost their money.
The U.S. Attorney in Manhattan, Damian Williams, said in an official statement:
“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.”
After pleading guilty, Alex Mahinsky now faces a maximum sentence of twenty years in prison. But he might receive a lighter sentence because he admitted to his crimes.
Mahinsky had this to say when pleading guilty:
“I know what I did was wrong, and I want to try to do whatever I can to make it right.”
Alex Mashinsky’s former lawyer, Roni Cohen-Pavon, has also pleaded guilty and is cooperating with the authorities on the case. Prosecutors also said that Mashinsky has been misleading Celsius customers for many years.
A federal judge also recently denied Mashinsky’s motion to dismiss the charges related to CEL token manipulation, strengthening the prosecution’s case.
Impact on Celsius Customers and Creditors
As a result of this, Celsius creditors will receive $127 million in Bitcoin or USD payouts. Moreover, the company is taking legal action against Tether to recover over $2 billion in Bitcoin collateral, alleging misuse of funds.
Back in July, Celsius settled a lawsuit with KeyFi CEO Jason Stone after months of legal battles. KeyFi’s Stone had accused the company of conducting a Ponzi-like scheme and not disclosing investment risks.
Mashinsky’s guilty plea is a major step toward holding executives and officials accountable for wrongdoings that harmed the cryptocurrency market. Financial analyst Jacob King deemed Celsius as a “blatant Ponzi scheme,” while others, like Mario Nawfal, pointed out the scale of losses, with Celsius freezing $4.7 billion of customers’ assets before filing for bankruptcy in July 2022.
