Celsius Founder Alexander Mashinsky Pleads Guilty To $4.7 Billion Fraud Charges

Alexander Mashinsky, the former CEO of the now-bankrupt cryptocurrency lender Celsius, has pleaded guilty to two counts of fraud, facing a potential maximum sentence of 30 years in prison. 

This development comes in the wake of multiple charges filed by the US Department of Justice (DOJ), which originally accused him of seven counts related to fraud, conspiracy, and market manipulation.

US Attorney Calls Celsius Fraud Scheme One Of Crypto’s Largest

Mashinsky entered his guilty plea in a New York courtroom, admitting to committing commodities fraud and securities fraud connected to two deceptive schemes involving Celsius, which he co-founded as a purported “bank” for the crypto industry. 

In the first scheme, it was revealed that Mashinsky misled customers about “essential aspects” of the company’s operations, including its profitability and the nature of investments made with customer funds. 

In the second, the US Attorney’s Office for the Southern District of New York alleges that Celsius’ founder engaged in “illegal price manipulation” of Celsius’ proprietary token, CEL, while “secretly” selling his own holdings at artificially inflated prices.

Mashinsky has agreed to forfeit over $48 million in proceeds from these illegal activities as part of his plea agreement. 

US Attorney Damian Williams described Maschinsky’s actions as orchestrating “one of the largest frauds in the crypto industry. 

Williams said Maschinsky marketed Celsius as a safe alternative for crypto investments, claiming that customer funds were safe and that profits would be returned to users – claims that were ultimately proven false, according to the attorney’s statement.

A Closer Look At The Crypto Giant’s Collapse

At its peak, Celsius managed approximately $25 billion in assets, attracting a large base of retail investors enticed by the platform’s offerings, including an “Earn” program that promised high returns in exchange for customer assets. 

However, as the company faced mounting financial pressures, Mashinsky continued to assure clients of its stability, even as he withdrew significant personal assets from the platform.

The court documents revealed that Mashinsky and other Celsius executives engaged in a “years-long scheme” to mislead customers about the value and stability of the CEL token. 

Authorities further allege that they manipulated the token’s price by using customer funds to “prop up” its market value without disclosing these actions to investors. This manipulation allowed Mashinsky to profit from his sales of CEL.

The situation culminated in June 2022 when Celsius abruptly halted all customer withdrawals, leaving hundreds of thousands of investors unable to access approximately $4.7 billion worth of their crypto assets. 

Shortly after that, the company filed for Chapter 11 bankruptcy, marking a dramatic collapse for one of the largest platforms in the cryptocurrency sector.

At the time of writing, CEL is trading at $0.2690, up 9% in the past 24 hours. Despite this recovery, the token is still trading down 96% from its record high of $8 in 2021.

Featured image from Spiegel, chart from TradingView.com