Alex Mashinsky, the founder and former CEO of Celsius, was once the toast of the crypto town. At one point, Celsius claimed they were adding nearly $1 billion a month in new assets. Mashinsky’s mantra was that banks were not friends while claiming to be “disrupting the traditional banking model by putting customers before shareholders.” At one point, Mashinsky stated, “From a risk standpoint, we are probably one of the least risky businesses that regulators worldwide have ever seen.” These statements turned out to be false, jilting investors who feared they would never see their money again when Celsius filed for bankruptcy.
Now, Mashinsky will spend the next few years, up to twelve, in prison for defrauding investors. He was sentenced this week after admitting guilt to his criminal activity.
As was reported earlier, Mashinsky now acknowledges his wrongdoing claiming he wants to do whatever he can to make things right.
Xapo Bank CEO Seamus Rocca says the conviction and prison sentence of the fraudster is an example of the evolution of risk and trust in the crypto sector.
“The sentencing of Alex Mashinsky is a clear reminder of how far we’ve come in the digital asset lending space. Celsius’ collapse, and others attached to it, exposed significant structural flaws in how risk was managed and communicated to users. Celsius relied heavily on rehypothecation, reusing customer collateral to fund its high-risk strategies, a practice that ultimately amplified losses and shattered trust when the market turned,” says Rocca.
He added that Bitcoin-based lending is growing, but it is being led by firms that do not use rehypothecated crypto.
Meanwhile, Celsius is returning some funds, up to 79.2%, to aggrieved investors. It is unclear how Mashinsky will ever be able to make it up to investors.
