Crypto platform Celsius's co-founder convicted to 12 years in federal prison for masterminding one of the largest frauds in the cryptocurrency sector, causing the company's collapse with a $1 billion financial deficit.
Rewritten Article:
Alex Mashinsky, co-founder of the defunct cryptocurrency lending platform Celsius, faces a 12-year stint behind bars (Reuters report). A Manhattan court delivered the sentence following a lengthy hearing that included Mashinsky's victims and himself.
The Department of Justice (DOJ) accused Mashinsky of seven counts of fraud in July 2023. Initially, he denied the allegations, but ultimately admitted to two charges of commodities fraud and securities fraud through a plea deal. Mashinsky declared that he'd deceived Celsius customers about the business's workings and planned investments, and manipulated the price of a proprietary crypto coin for personal benefits. In addition, he was to forfeit $48 million to the DOJ.
US Attorney Damian Williams stated, post-guilty plea, "Alexander Mashinsky masterminded one of the largest scams in the crypto sector." The hearing underlined this Office's commitment to bringing fraudsters like Mashinsky to justice.
Launched in 2017, Celsius marked itself as a crypto lending platform, boasting over $25 billion in customer assets (per the company's claims). Customers could park their crypto assets with Celsius for high-yield returns or secure loans cash advances, all pitched as a trendy new alternative to traditional banks. Mashinsky frequently characterized conventional banks as untrustworthy, wearing t-shirts emblazoned with the slogan "Banks Aren't Your Friends."
Comparable to other crypto magnates, such as Do Kwon and his "Lunatics," Mashinsky was the public face of Celsius, with a dedicated following of supporters he'd dub "Celsians." When Terra's stablecoin tanked in May 2022, causing industry-wide downturns and significant losses for Celsius (prosecutors argue the company was already financially unstable), it was a precursor to the company's collapse in July 2022. Court filings showed a $1.2 billion gap in Celsius' funds, prompting interest from both the DOJ and Vermont state regulators.
The state regulator flagged the "heavy losses sustained by retail investors; for instance, middle-class, ordinary investors who may have plowed their entire college funds or retirement accounts into Celsius."
Celsius’ bankruptcy filing froze deposits worth more than $4.7 billion, with around 60% recoverable, though not in full as cash.
The most interesting facet of the case is arguably Mashinsky's sentencing. He could have faced 30 years, but after a plea deal, that figure would have dropped significantly. Instead, his defense argued for a single-year sentence, pointing to his pleas, military service, hardships in his childhood, and the impact of the wider crypto market on Celsius' downfall.
His lawyers' court filing claimed, "This case isn't about an arrogant, greedy swindler looking to steal people's hard-earned money for his own pleasures. Such post-hoc, shallow, and dehumanizing stereotypes don't apply here."
On the other hand, the DOJ sought 20 years, arguing Mashinsky showed no remorse for his actions and knew he was defrauding customers. The prosecution document states, "His fraud was not involuntary, unintentional, or the result of bad luck. It stemmed from deliberate, calculated decisions to lie, deceive, and steal for personal profit. He now rejects any recognition of his continued wrongdoing..."
The trial hinged on Mashinsky's character: was he a well-meaning entrepreneur who lied under the weight of the business? Or a calculated fraudster who deceived investors and pocketed millions?
Prosecutors unsurprisingly likened Mashinsky to Sam Bankman-Fried, recently sentenced to 25 years in prison for his part in FTX's downfall. Defense counsel, however, maintained the two cases were vastly different, as Bankman-Fried hadn't been accused of embezzlement or stealing customer funds.
Mashinsky, at 59, will serve at least 85% of his sentence, even if granted early release. The sentence marks the end of a previously successful tech career; as recently as 2022, the Wall Street Journal dubbed Mashinsky "a brash, self-assured entrepreneur with endless big ideas," and his resume included legitimate companies like VoiceSmart, GroundLink, Q-Wireless, and a brief tenure as CEO of Novatel (now Mifi).
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- The imprisonment sentence of 12 years for Alex Mashinsky, co-founder of the defunct cryptocurrency lending platform Celsius, was handed down by a Manhattan court.
- Mashinsky faced seven counts of fraud as accused by the Department of Justice (DOJ) in July 2023, and ultimately admitted to two charges of commodities fraud and securities fraud.
- Mashinsky's actions resulted in him manipulating the price of a proprietary crypto coin for personal benefits and deceiving Celsius customers about the business’s workings and planned investments.
- US Attorney Damian Williams referred to Mashinsky as a "one of the largest scams in the crypto sector" following his guilty plea.
- Celsius, launched in 2017, boasted over $25 billion in customer assets, offering a trendy new alternative to traditional banks with high-yield returns and secured loans.
- The collapse of Celsius in July 2022, owing to heavy losses sustained by retail investors, led to issues with both the DOJ and Vermont state regulators.
- In general-news and crime-and-justice sections, Mashinsky's case has been compared to that of Sam Bankman-Fried, recently sentenced to 25 years in prison for his part in FTX’s downfall.
- Despite the sentencing, Mashinsky's resume includes legitimate companies like VoiceSmart, GroundLink, Q-Wireless, and a brief tenure as CEO of Novatel (now Mifi).
