Celsius Founder Alex Mashinsky Pleads Guilty To Fraud

Another high profile legal case for crypto sector sees the founder and former CEO of cryptocurrency lender Celsius Network, pleading guilty on Tuesday to two counts of fraud.

Alex Mashinsky, aged 59, made the guilt plea after he had been arrested in July 2023 and was charged with seven counts of securities and commodities fraud, conspiracy and market manipulation charges.

In July 2022 New Jersey-based Celsius Network had filed for Chapter 11 bankruptcy protection, days after Vermont’s Department of Financial Regulation (DFR) had warned Celsius was “deeply insolvent and lacked the assets and liquidity to honour its obligations to account holders and other creditors.”

Celsius chapter 11

The move into bankruptcy protection came after Celsius Network in June 2022 had frozen all withdrawals, swaps, and transfers between customer accounts, citing “extreme” conditions.

Celsius, which once had a value of $12 billion, was one of the biggest crypto lending platforms in the US, and allowed users to lend out their tokens as collateral for other crypto projects in exchange for annual yields of up to 17 percent.

But investor interest in such high-risk areas dropped off dramatically after the collapse of the TerraUSD “stablecoin” in May 2022, which along with the Luna coin was linked to a similar high-yield scheme.

Then the collapse of FTX in October 2022 triggered another investor retreat.

FTX’s founder Sam Bankman-Fried was convicted of stealing roughly $8bn from the exchange’s customers in November 2023 and sentenced in March to 25 years in prison.

In November 2023, the US bankruptcy court approved a restructuring plan for Celsius Network, allowing the company to emerge from bankruptcy protection.

The firm has since pivoted to Bitcoin mining.

Guilty plea

Mashinsky had been arrested in July 2023 on federal securities fraud charges.

Both Alexander Mashinsky and the former chief revenue officer of Celsius, Roni Cohen-Pavon, were further charged with conspiracy, securities fraud, market manipulation, and wire fraud for illicitly manipulating the price of CEL, Celsius’s proprietary crypto token, all while secretly selling their own CEL tokens at artificially inflated prices.

In all Mashinsky, was charged with seven criminal counts, while Celsius’ former chief revenue officer, Roni Cohen-Pavon, was charged with four criminal counts.

Prosecutors alleged that Mashinsky had personally reaped approximately $42m in proceeds from selling his holdings of the Cel token.

Cohen-Pavon pleaded guilty in September 2023 and agreed to co-operate with the US prosecutors’ investigation.

Now according to Reuters, Mashinsky said on Tuesday he intends to plead guilty to two counts of fraud. It comes after US district judge John Koeltl had in November denied a motion by Mashinsky to dismiss two criminal counts ahead of his trial, which had been slated for 28 January.

On Tuesday, during a hearing before Judge Koeltl, Mashinsky reportedly said he agreed to plead guilty to two out of the seven counts he was initially charged with.

Mashinsky will be sentenced on 8 April 2025, and potentially faces up to 30 years in prison.