Celsius founder Alex Mashinsky pleads guilty to two counts of fraud | Business and Economic Affairs

Mashinsky was one of many crypto companies accused of fraud after the 2022 price crash caused the firms to collapse.

Alex Mashinsky, founder and former CEO of cryptocurrency lender Celsius Network, pleaded guilty to two counts of fraud in the United States.

Mashinsky, 59, was indicted on July 13, 2023, on seven counts of fraud, conspiracy and market manipulation. Federal prosecutors in Manhattan say he misled Celsius customers to persuade them to invest, and artificially inflated the value of his company’s proprietary crypto token. He pleaded not guilty later that day.

On Tuesday, during a hearing before US District Judge John Koeltl, Mashinsky said he pleaded guilty to two of the seven charges he was originally charged with: securities fraud and a fraudulent scheme to manipulate the price of CEL, the domestic Celsius token.

In court, Mashinsky admitted that he gave Celsius customers “false comfort” by conducting an interview in 2021 in which he said Celsius received approval from regulators for its “Hola” program, which it did not. The Earn program allowed users to deposit cryptocurrencies such as Bitcoin, Ethereum and Tether and receive weekly interest payments, which provide approximately 18 percent per year.

He said he also failed to disclose that he was selling his CEL goods.

“I know what I did was wrong, and I want to try to do everything I can to make it right,” said Mashinsky.

As part of his plea deal with prosecutors, Mashinsky agreed not to serve any sentence of 30 years or less — the maximum he faces in the two cases.

Mashinsky was one of several crypto moguls to be charged with fraud after the 2022 crash in crypto prices caused dozens of companies, including the current FTX exchange, to collapse.

Prices of digital assets such as Bitcoin have risen, partly due to optimism about US President-elect Donald Trump’s expected policies regarding cryptocurrency.

Founded in 2017, Celsius filed for Chapter 11 bankruptcy protection in the US – which allows the business to continue operating while working on a plan to repay its creditors – in July 2022 after customers rushed to withdraw deposits as crypto prices fell. Many initially did not have access to their funds. The company emerged from bankruptcy on January 31, and has turned to Bitcoin mining.

Crypto lenders like Celsius are growing rapidly as crypto prices rise amid the COVID pandemic. They promised easy access to loans and eye-watering interest rates to depositors, then loaned tokens to institutional investors, hoping to profit from the difference.

Celsius was among the first in a series of bankruptcies in the cryptocurrency sector in 2022 as token prices plummeted amid rising interest rates and stubborn inflation. It filed for bankruptcy shortly after Singapore-based crypto hedge fund Three Arrows Capital and rival crypto lender Voyager Digital did so.

Federal prosecutors in Manhattan charged Mashinsky and Celsius’ former chief revenue officer, Roni Cohen-Pavon, with manipulating the company’s crypto token market. Cohen-Pavon pleaded guilty in September 2023 and agreed to cooperate with prosecutors’ investigation.

Prosecutors say Mashinsky also personally reaped an estimated $42m in proceeds from selling his CEL token.

Sam Bankman-Fried, the founder of FTX, was convicted of stealing an estimated $8bn from exchange clients in November 2023 and in March was sentenced to 25 years in prison.