Alex Mashinky, the co-founder and former CEO of defunct cryptocurrency platform Celsius, pleaded guilty in Manhattan court Tuesday to one count each of commodities fraud and securities fraud tied to his firm’s downfall.
According to the Justice Department, Mashinsky misled Celsius’ customers about the firm’s success, profitability, and about investments it made using customer funds. He also manipulated the price of Celsius’ native token, CEL, while secretly selling his own CEL tokens at artificially inflated prices, the DOJ said.
Mashinsky originally pleaded not guilty to the charges last year following his July 2023 arrest.
But he changed his plea in court Tuesday, and he agreed to forfeit more than $49 million in proceeds from his schemes.
“Alexander Mashinsky orchestrated one of the biggest frauds in the crypto industry,” said U.S. Attorney Damian Williams in a prepared statement Tuesday. “He lured ordinary, retail crypto investors into investing billions of dollars in Celsius with false promises that their investments were low-risk.
“In reality, Celsius was never profitable. 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,” Williams said.
Mashinsky co-founded Celsius in 2017, and the platform grew with the nascent crypto industry. At its height in 2021, Celsius held approximately $25 billion in assets on its platform. But following unrest in the market and Mashinsky’s fraud, Celsius declared bankruptcy in 2022.
Hundreds of thousands of customers still held around $4.7 billion in crypto at the time on the platform – and they wouldn’t get access to any of those funds until January 2024, when distributions began from the bankruptcy estate.
Customers have only received 60% of the value of their initial losses, according to bankruptcy court documents.
Celsius was one of several crypto firms that went belly-up in 2022, and not the only one connected to executive crimes: FTX filed bankruptcy four months after Celsius, and its former CEO Sam Bankman-Fried is currently serving a 25-year prison term. Other executives have also received prison time or supervised release.
“I knew what I did was wrong and I want to do whatever I can to make it right,” Mashinsky told U.S. District Judge John Koeltl, according to Bloomberg. “I accept full responsibility for my actions.”
“I gave an interview in which I suggested that Celsius had received approval from regulators even though that was not true,” Mashinsky said, according to Bloomberg.
Former Celsius Chief Revenue Officer Roni Cohen-Pavon was also charged with fraud last year, and he pleaded guilty, agreeing to cooperate with the government’s case against Mashinsky.
Mashinsky’s sentencing is scheduled for April 8
