Emily Walker
Alexander Mashinsky, the ex-CEO of the bankrupt cryptocurrency lender Celsius, has admitted guilt to two fraud charges and is facing up to 30 years in prison.
This plea follows a series of allegations from the US Department of Justice (DOJ), which initially included seven charges revolving around fraud, conspiracy, and manipulation of the market.
US Attorney Labels Celsius Fraud as One of the Biggest in Crypto History
Mashinsky made his guilty plea in a New York court, acknowledging his involvement in commodities and securities fraud that stemmed from two fraudulent schemes related to Celsius, which he established as a supposed “bank” for cryptocurrency.
The first scheme involved Mashinsky deceiving customers about crucial aspects of the business, such as its profitability and the actual investments made with their funds.
In the second scheme, prosecutors claim that he engaged in “illegal price manipulation” of Celsius’ token, CEL, while secretly liquidating his own holdings at inflated prices.
As part of his plea deal, Mashinsky has consented to give up more than $48 million earned from these illegal activities.
US Attorney Damian Williams characterized Mashinsky’s actions as orchestrating “one of the largest frauds in the crypto industry.”
Williams remarked that Mashinsky had pitched Celsius as a reliable option for crypto investments, assuring clients that their funds were secure and that they would receive profitable returns, which later turned out to be untrue, according to the attorney’s statement.
Examining the Downfall of the Crypto Giant
At its height, Celsius managed around $25 billion in assets, attracting many retail investors drawn to its enticing offerings, including a high-yield “Earn” program.
As financial difficulties mounted, Mashinsky continued to reassure clients about the company’s stability while withdrawing significant personal funds from the platform.
Court documents indicated that Mashinsky and other executives were involved in a prolonged effort to mislead customers regarding the value and security of the CEL token.
Authorities claim they inflated the token’s price by using customer funds to artificially bolster its market value, all while failing to inform investors of their actions. This led to Mashinsky profiting from his CEL sales.
The situation escalated in June 2022 when Celsius unexpectedly froze all customer withdrawals, impacting hundreds of thousands of investors who were locked out of about $4.7 billion in crypto assets.
Shortly thereafter, the company filed for Chapter 11 bankruptcy, marking a significant collapse of one of the largest platforms in the cryptocurrency industry.
Currently, CEL is trading at $0.2690, having increased by 9% in the last 24 hours. However, despite this uptick, the token remains down 96% from its all-time high of $8 in 2021.
Image source: Spiegel, chart source: TradingView.com