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Alex Mashinsky, the founder of collapsed cryptocurrency lender Celsius Network, pleaded guilty on Tuesday in a criminal case alleging that he misled investors about the company’s financial condition and used customer funds to manipulate the value of a digital token it issued.
“I know what I did was wrong and I want to do what I can to make it right,” Mashinsky, 59, told Judge John Koeltl during the hour-long hearing in Manhattan federal court. “I accept full responsibility for my actions.”
In an agreement with prosecutors he pleaded guilty to one count of commodities fraud and one count of securities fraud.
The two counts carry a combined maximum sentence of 30 years in prison, and Mashinsky has also agreed to forfeit $48mn. Sentencing has been set for April 8.
Damian Williams, the US attorney in Manhattan, on Tuesday said Mashinsky “orchestrated one of the biggest frauds in the crypto industry”, luring “ordinary, retail crypto investors into investing billions of dollars in Celsius with false promises that their investments were low-risk.”
New Jersey-based Celsius launched in 2017 to accept deposits of cryptocurrencies, paying interest and extending loans to users who pledged their deposits as collateral. The company paid premium interest rates to depositors and charged little for loans tied to the value of digital currencies.
At its peak it said it held $25bn in assets, with a large customer base of retail investors. But it abruptly blocked customer withdrawals in June 2022 after a rout in global crypto markets prompted waves of redemption requests. It filed for bankruptcy the following month, revealing a $1bn deficit.
Mashinsky, a colourful figure who built a cult following preaching the virtues of crypto to break the grip of big banks, initially pleaded not guilty to the charges brought by prosecutors from the Manhattan US attorney’s office, which came a year after Celsius’ failure.
Prosecutors accused him of using customer funds to prop up the market of Celsius’s digital token, CEL, allowing it to sell its own holdings at falsely inflated values. Mashinsky was alleged to have personally reaped $42mn in proceeds from sales of CEL while claiming he was continuing to hold it and encouraging investors to do so as well.
Prosecutors cited a private message exchange between Mashinksy and Roni Cohen-Pavon, Celsius’ chief revenue officer, in which Cohen-Pavon wrote: “The issue is that people are selling CEL and no one is buying except for us,” adding “the value was fake” and the company was spending $8mn a week to keep it aloft.
In addition to the cryptocurrency sales, Mashinksy was also accused of withdrawing $8mn of his own digital coin assets from Celsius even as he assured its customers the group had enough liquidity to satisfy redemption demands.
Cohen-Pavon was also charged in the case and pleaded guilty last year. Celsius, operating under the control of a restructuring team, entered a non-prosecution agreement and agreed to co-operate with the investigation. Lawyers for Cohen-Pavon and Celsius did not respond to requests for comment.
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