Alex Mashinsky, former The CEO of bankrupt cryptocurrency lender Celsius has pleaded guilty to two counts of fraud, which together carry a maximum penalty of 30 years in prison.
In the wake of the company's collapse, the US Department of Justice charged Mashinsky with seven counts of fraud, conspiracy and market manipulation. After originally pleading not guilty, he was scheduled to face a criminal trial in the Southern District of New York in January.
However, during a court hearing Tuesday, Mashinsky pleaded guilty to one count of commodities fraud and one count of securities fraud. Mashinsky has admitted to lying to Celsius customers about fundamental aspects of the company, including how their money would be used, the DOJ says, and to manipulating the price of a proprietary crypto token for his personal financial gain.
As part of the plea deal, Mashinksky has agreed to forfeit $48 million in ill-gotten gains. He will be sentenced on April 8, 2025.
“Alexander Mashinsky orchestrated one of the largest frauds in the crypto industry,” U.S. Attorney Damian Williams said in a statement. “Today's convictions reflect this Office's commitment to holding fraudsters like Mashinsky accountable for their crimes.”
Founded in 2017 by Mashinsky, Celsius marketed itself as a new age alternative to traditional banks – as the “safest place for your crypto,” according to the DOJ.
The company took crypto deposits, which it invested or lent to finance interest payments to customers. People were attracted by promises of interest rates of up to 17 percent on deposits – dozens of times higher than the interest rates offered by banks at the time. At its peak, Celsius held more than $25 billion in customer assets, the DOJ alleges.
However, things went wrong in May 2022. The collapse of the Terra Luna stablecoin simultaneously left a billion-dollar hole in the Celsius balance sheet and, as crypto prices plummeted, sent panicked customers rushing to withdraw billions of dollars of crypto from their Celsius accounts. After investments in Terra Luna and other assets failed, the company no longer had the money to pay and was eventually forced to suspend withdrawals. In July of that year, Celsius filed for bankruptcy, seizing $4.7 billion of its customers' money.
