U.S. Attorney Damian Williams | U.S. Department of Justice
Alexander Mashinsky, the founder and former CEO of Celsius Network LLC, has pled guilty to charges of commodities fraud and securities fraud. This development comes as part of two fraudulent schemes related to Celsius, a crypto asset platform once described as the "bank" of the crypto industry. The announcement was made by Damian Williams, the United States Attorney for the Southern District of New York.
Mashinsky admitted to misleading Celsius's customers about key aspects of the company's operations, including its profitability and investment strategies using customer funds. Additionally, he manipulated the price of CEL, Celsius's proprietary crypto token, while selling his own holdings at inflated prices. As part of his plea agreement, Mashinsky will forfeit over $48 million in proceeds from these illegal activities. His guilty plea was entered before U.S. District Judge John G. Koeltl.
U.S. Attorney Damian Williams commented on the case: “Alexander Mashinsky orchestrated one of the biggest frauds in the crypto industry. He lured ordinary, retail crypto investors into investing billions of dollars in Celsius with false promises that their investments were low-risk." Williams further explained how Mashinsky falsely assured customers about their investments' safety and profitability.
The allegations detailed in court filings describe Celsius as a platform that allowed customers to earn returns on their crypto assets through various programs like "Earn," "Custody," and "Borrow." Despite marketing itself as a safe place for crypto investments, Celsius engaged in risky practices under Mashinsky's leadership.
Mashinsky is accused of making numerous public misrepresentations about Celsius’s business model to attract retail investors globally. By fall 2021, Celsius had reportedly grown into one of the largest crypto platforms worldwide with around $25 billion in assets at its peak.
The indictment also reveals that Mashinsky and others involved at Celsius manipulated CEL's market value by spending hundreds of millions on open market purchases to artificially inflate its price. Roni Cohen-Pavon, Chief Revenue Officer at Celsius who previously pled guilty to similar charges, noted that this manipulation created a false market value for CEL.
As part of this scheme, Mashinsky made misleading statements about his own sales activities regarding CEL tokens while profiting significantly from these actions. In June 2022, shortly before halting customer withdrawals due to financial instability within Celsius, Mashinsky withdrew approximately $8 million worth of non-CEL assets from the platform.
Celsius filed for Chapter 11 bankruptcy on July 13, 2022, leaving many retail investors unable to access their approximately $4.7 billion worth of crypto assets held on the platform.
Mashinsky faces a maximum sentence of 30 years in prison based on these charges; however, actual sentencing will be determined by Judge Koeltl on April 8, 2024. The investigation received contributions from several agencies including the Federal Bureau of Investigation (FBI), U.S Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC).
For those who believe they may have been affected by these schemes or wish to provide information related to sentencing proceedings can contact Wendy Olsen-Clancy at wendy.olsen@usdoj.gov or call 866-874-8900.
