Alex Mashinsky, the founder and former CEO of the now-bankrupt cryptocurrency lender Celsius Network, has been sentenced to 12 years in prison for securities and commodities fraud. His sentencing, handed down by US District Judge John Koeltl in Manhattan, marks one of the heaviest penalties related to the cryptocurrency market collapse in 2022.
Mashinsky, who pleaded guilty to the charges in December, misled investors about the security of Celsius’s operations and inflated the value of its proprietary token, Cel. Federal prosecutors argued for a sentence of at least 20 years, citing that Mashinsky’s actions defrauded thousands and resulted in billions in losses, while he personally reaped over $48 million from these activities. US attorney Jay Clayton emphasised that the burgeoning field of digital assets does not absolve individuals from responsibility for deceitful practices.
In contrast, Mashinsky requested a reduced sentence of one year and one day, expressing remorse for his actions and wanting to address the harm caused to both his family and former customers. His sentence also includes three years of supervised release and the forfeiture of $48.4 million.
Celsius, founded in 2017 and located in Hoboken, New Jersey, sought Chapter 11 bankruptcy protection in July 2022 after a surge of customer withdrawals triggered by plummeting cryptocurrency prices. The company promised depositors high interest rates, offering up to 17% on some accounts, but ultimately found itself with a staggering $1.19 billion deficit at the time of bankruptcy.
Originally from Ukraine, Mashinsky emigrated with his family to Israel before settling in New York in 1988. His legal troubles extend beyond criminal charges, as he faces civil lawsuits from several regulatory bodies, including the US Securities and Exchange Commission and the Commodity Futures Trading Commission, as well as actions from the Federal Trade Commission and New York Attorney General Letitia James.
As the cryptocurrency lending landscape grapples with regulatory scrutiny and public trust challenges, Mashinsky’s case serves as a significant cautionary tale about the importance of transparency and integrity in the rapidly evolving digital asset sector.