Celsius founder Alex Mashinsky sentenced to 12 years for crypto fraud, ordered to pay $48M

Five months after pleading guilty to multi-billion-dollar fraud, Celsius founder Alex Mashinsky was sentenced Thursday to 12 years in prison for defrauding investors. The Ukraine-born Mashinsky was first arrested in 2023 following a federal investigation into the collapse of his crypto lending startup.

On Thursday, the former CEO of the bankrupt crypto lending platform stood before U.S. District Judge John Koeltl in Manhattan, where the lengthy sentence was handed down. Prosecutors had asked for at least 20 years, calling it a “just punishment” for misleading thousands of customers and pocketing more than $48 million in the process.

“Alex Mashinsky, the founder and former chief executive of bankruptcy cryptocurrency lender Celsius Network, was sentenced on Thursday to 12 years in prison after pleading guilty in December to securities fraud and commodities fraud,” Reuters reported.

Celsius Network Founder Gets 12 Years in Prison for Defrauding Crypto Investors

Mashinsky, 59, was found guilty of securities and commodities fraud after inflating the value of Celsius’ native token, CEL, and falsely pitching the company as a safe haven for crypto investors. The fallout left billions in losses and added Mashinsky’s name to the growing list of disgraced crypto executives now behind bars.

His sentencing includes three years of supervised release and a court order to forfeit $48.4 million. His legal team had asked for just over a year, citing remorse and a desire to make things right with his family and former customers.

“The case for tokenization and the use of digital assets is strong, but it is not a license to deceive,” U.S. Attorney Jay Clayton said in a statement following the ruling.

Mashinsky’s sentencing ranks among the harshest so far from the 2022 crypto crash. FTX founder Sam Bankman-Fried is currently serving 25 years for his role in a separate collapse and is appealing the verdict.

Celsius, once based in Hoboken, New Jersey, was founded in 2017 and promised high returns to crypto depositors, offering up to 17% interest on some accounts. But as the crypto market crashed in mid-2022, users rushed to pull funds. In July of that year, the company filed for Chapter 11 bankruptcy, revealing a $1.19 billion hole in its balance sheet.

Mashinsky, born in Ukraine and raised in Israel, moved to New York in the late ‘80s. His fall from grace has been steep and public, marked by multiple civil suits from the SEC, CFTC, FTC, and New York Attorney General Letitia James.

The Rise and Fall of Celsius Network

Celsius Network, launched in 2017 with promises of high returns and slogans like “Unbank Yourself,” marketed itself as a safe alternative to traditional banks. It offered programs like “Earn” and “Custody,” claiming to generate high yields for users by leveraging cryptocurrency lending and borrowing. By 2021, Celsius managed $25 billion in assets, mostly from retail investors.

However, behind the scenes, Mashinsky and his team misrepresented the company’s financial stability and used customer funds to inflate CEL’s price artificially. This created a false sense of profitability and security, leaving investors vulnerable to massive losses when the company collapsed.

In June 2022, Celsius froze withdrawals for its 1.7 million customers, locking up more than $4.7 billion in crypto assets. A month later, the company filed for bankruptcy, joining other crypto startups affected by their exposure to the now-bankrupt hedge fund Three Arrows Capital (3AC).