Alex Mashinsky, the founder and former CEO of failed crypto investment platform Celsius Network, has pleaded guilty to fraud, according to reports.
WSJ.com reports that Mashinsky will now avoid a criminal trial. At the same time, a guilty plea means he will face a maximum prison sentence of 30 years. The sentencing hearing is scheduled for next April.
Mashinsky was arrested in June 2023 and charged with criminal offenses, in addition to the civil charges filed by the SEC and CFTC.
Celsius collapsed into bankruptcy spectacularly in 2022, which became a catalyst for the broader crypto winter, which saw multiple firms fail.
Celsius effectively ceased operations in mid-June 2022 as crypto valuations plummeted, and it could not make customer redemptions. It was previously reported that after Celsius halted trading and redemptions, Mashinsky continued to reassure investors that their funds were safe publicly. Meanwhile, he removed $8 million of his assets from the Celsius platform.
Celsius and its Earn program attracted customers by promising high returns on parked assets while promoting its anti-bank mantra that banks are not your friends. At the same time, Mashinsky and others touted the safety of investing on their platform. A claim that is now obviously false.
The US Department of Justice charged Mashinsky with securities fraud, commodities fraud, and wire fraud for defrauding customers and misleading them about core aspects of the company he founded.
When the criminal charges were announced, U.S. Attorney Damian Williams noted that at its height, Celsius managed approximately $25 billion in customer assets. Williams said:
“This case, like the others my Office has recently announced alleging fraud in the crypto economy, may appear complicated. But the message we send today is quite simple: if you rip off ordinary investors to line your own pockets, we will hold you accountable. Whether it’s old-school fraud or some new-school crypto scheme, it doesn’t matter one bit. It’s all fraud to us. And we’ll be here to catch it.”
Individuals who committed funds to Celsius are still sorting out how to regain their funds. Earlier today, the Litigation Oversight Committee and the Litigation Administrator reported that approximately $127 million from the Litigation Recovery Account was available for distribution to eligible creditors for its second distribution. Most of this amount is expected to be distributed to creditors, though a portion will be reserved for those whose claims are not yet eligible.