Alex Mashinsky, who once stood at the helm of crypto lending platform Celsius Network, will spend the next 12 years behind bars. The sentence comes after his February conviction on securities fraud, wire fraud, and market manipulation charges.
U.S. District Judge John Koeltl handed down the punishment in Manhattan federal court yesterday. The judge also ordered Mashinsky to pay $2 billion in forfeiture and restitution to victims.
“The defendant exploited the trust of thousands of people,” Judge Koeltl stated during the sentencing. “Mr. Mashinsky lied repeatedly.”
The 58-year-old crypto entrepreneur built Celsius into one of the industry’s largest lending platforms before its spectacular collapse in July 2022. Prosecutors said Mashinsky lied to investors and customers about the company’s financial health and business practices.
His crimes left more than 1.4 million customers unable to access around $8 billion in crypto deposits when Celsius froze withdrawals and filed for bankruptcy. Many victims lost life savings and retirement funds.
“I’m not perfect, I made my mistakes,” Mashinsky told the court before learning his fate. “I’m sorry from the bottom of my heart.”
Victims who spoke at the hearing painted a different picture. A doctor described losing millions of dollars meant for his children’s education. Another customer said the Celsius collapse forced him to delay retirement by a decade.
Prosecutors had sought a 19-year sentence, calling Mashinsky’s actions “one of the biggest financial frauds in recent history.” They argued he enriched himself while knowingly misleading customers, selling over $42 million of his own Celsius token holdings as the company’s troubles mounted.
Defense attorneys requested a much lighter 5-year sentence, citing Mashinsky’s charitable works and portraying him as a well-intentioned entrepreneur who got caught in a market downturn.
The collapse of Celsius in 2022 marked one of several high-profile crypto failures that year, including the spectacular implosion of FTX under Sam Bankman-Fried. The industry’s so-called “crypto winter” wiped out over $2 trillion in market value.
Federal regulators have since stepped up enforcement actions against crypto companies. The Securities and Exchange Commission has filed numerous lawsuits against major exchanges like Coinbase and Binance, arguing many crypto tokens qualify as unregistered securities.
For victims, Mashinsky’s sentence offers little comfort against their financial losses. Bankruptcy proceedings for Celsius continue, but customers are expected to recover only a fraction of their deposits.
The case highlights the risks in the largely unregulated crypto market. While blockchain technology offers innovation, the lack of traditional banking safeguards left Celsius customers with few protections when the company failed.
Mashinsky, who immigrated to the United States from Ukraine as a teenager, previously found success as a tech entrepreneur before founding Celsius in 2017. He promoted the platform as a safe alternative to banks, offering high interest rates on crypto deposits.
His conviction follows similar outcomes for other crypto executives. Last month, Sam Bankman-Fried received a 25-year sentence for fraud at FTX, while Terraform Labs founder Do Kwon awaits trial for his role in a $40 billion crypto crash.
Federal prosecutors warn more cases may follow as investigators continue examining the practices of various crypto companies during the market’s boom years.
