By Luc Cohen
NEW YORK (Reuters) – Alex Mashinsky, the founder and former CEO of cryptocurrency lender Celsius Network, pleaded guilty on Tuesday to two counts of fraud.
Mashinsky, 59, was indicted on July 13, 2023, on seven counts of fraud, conspiracy and market manipulation charges. Federal prosecutors in Manhattan said he misled customers of Celsius 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 U.S. District Judge John Koeltl, Mashinsky said he pleaded guilty to two out of the seven counts he was initially charged with: commodities fraud, and a fraudulent scheme to manipulate the price of CEL, Celsius’ in-house token.
In court, Mashinsky admitted to giving Celsius customers “false comfort” by giving an interview in 2021 in which he said Celsius had received approval from regulators for its “Earn” program, which it had not.
He said he also failed to disclose that he had been selling his holdings of CEL, the platform’s in-house token.
“I know what I did was wrong, and I want to try to do whatever I can to make it right,” Mashinsky said.
As part of his plea deal with prosecutors, Mashinsky agreed not to appeal any sentence of 30 years or less – the maximum he faces for the two counts.
Mashinsky was one of several crypto moguls to be charged with fraud after a slump in crypto prices in 2022 caused a number of companies, including now-bankrupt exchange FTX, to collapse.
Prices for digital assets like Bitcoin have since surged, in part due to optimism about U.S. President-elect Donald Trump’s expected policies friendly toward cryptocurrency.
Founded in 2017, Celsius filed for Chapter 11 bankruptcy protection in July 2022 after customers rushed to withdraw deposits as crypto prices fell. Many were initially unable to access their funds. The company exited bankruptcy on Jan. 31, and has pivoted to Bitcoin mining.
Crypto lenders such as Celsius grew rapidly as crypto prices surged during the COVID pandemic. They promised easy loan access and eye-popping interest rates to depositors, then lent out 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 cratered amid rising interest rates and stubbornly high 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 accused Mashinsky and Celsius’ former chief revenue officer, Roni Cohen-Pavon, with manipulating the market for the company’s crypto token, known as Cel. Cohen-Pavon pleaded guilty in September 2023 and agreed to cooperate with prosecutors’ investigation.
Prosecutors have said Mashinsky also personally reaped approximately $42 million in proceeds from selling his holdings of the Cel token.
FTX’s founder Sam Bankman-Fried was convicted of stealing roughly $8 billion from the exchange’s customers in November 2023 and sentenced in March to 25 years in prison.
(Reporting by Luc Cohen in New York; Additional reporting by Dietrich Knauth in New York; Editing by Noeleen Walder, Will Dunham and Deepa Babington)
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