Celsius founder Alex Mashinsky pleads guilty to fraud charges (updated)
03/12/2024 20:28
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Mashinsky to be sentenced in April
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Guilty plea averts trial that had been scheduled for
January
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Celsius filed for Chapter 11 bankruptcy protection in 2022
(Adds sentencing date in paragraph 7, quote from prosecutor in
paragraph 9, quote from defense lawyer in paragraph 11)
By Luc Cohen
NEW YORK, Dec 3 (Reuters) -
Alex Mashinsky, founder and former CEO of cryptocurrency
lender Celsius Network, pleaded guilty on Tuesday to two counts
of fraud.
Mashinsky, 59, was indicted on July 13, 2023, on seven
counts of fraud, conspiracy and market manipulation charges.
Federal prosecutors in Manhattan said he misled customers of
Celsius to persuade them to invest, and artificially inflated
the value of his company's proprietary crypto token. He pleaded
not guilty that day.
On Tuesday, during a hearing before U.S. District Judge John
Koeltl, Mashinsky said he pleaded guilty to two out of the seven
counts he was initially charged with: commodities fraud, and a
fraudulent scheme to manipulate the price of CEL, Celsius’
in-house token.
In court, Mashinsky admitted to giving Celsius customers
"false comfort" by giving an interview in 2021 in which he said
Celsius had received approval from regulators for its "Earn"
program, which it had not. That program offered to deploy
customers' cryptocurrency assets to yield investment returns.
He said he also failed to disclose that he had been selling
his holdings of CEL, the platform's in-house token.
"I know what I did was wrong, and I want to try to do
whatever I can to make it right," Mashinsky said.
As part of his plea deal with prosecutors, Mashinsky agreed
not to appeal any sentence of 30 years or less - the maximum he
faces for the two counts. Koeltl is set to sentence him on April
8, 2025.
Federal prosecutors in Manhattan have said Mashinsky
also personally reaped approximately $42 million in proceeds
from selling his holdings of the Cel token.
"Mashinsky made tens of millions of dollars selling his
own CEL at artificially high prices, while his customers were
left holding the bag when the company went bankrupt," Damian
Williams, the U.S. Attorney in Manhattan, said in a statement on
Tuesday.
Before pleading guilty, Mashinsky had been scheduled to
go on trial on Jan. 28.
"Sometimes, accepting responsibility when and where
appropriate is the best way to help everybody move on,"
Mashinsky's defense lawyer Marc Mukasey told reporters after the
hearing on Tuesday.
Founded in 2017, Celsius filed for Chapter 11 bankruptcy
protection in July 2022 after customers rushed to withdraw
deposits as crypto prices fell. Many were initially unable to
access their funds. The company exited bankruptcy on Jan. 31,
and has pivoted to Bitcoin mining.
Crypto lenders such as Celsius grew rapidly as crypto prices
surged during the COVID pandemic. They promised easy loan access
and eye-popping interest rates to depositors, then lent out
tokens to institutional investors, hoping to profit from the
difference.
Mashinsky was one of several crypto moguls to be charged
with fraud after a slump in crypto prices in 2022 caused a
number of companies, including now-bankrupt exchange FTX, to
collapse.
Prices for digital assets like Bitcoin have since surged, in
part due to optimism about U.S. President-elect Donald Trump's
expected policies friendly toward cryptocurrency.
Celsius' former chief revenue officer, Roni Cohen-Pavon,
pleaded guilty in September 2023 and agreed to cooperate with
prosecutors' investigation.
FTX's founder Sam Bankman-Fried was convicted of stealing
roughly $8 billion from the exchange's customers in November
2023 and sentenced in March to 25 years in prison.
(Reporting by Luc Cohen in New York; Additional reporting by
Dietrich Knauth in New York; Editing by Noeleen Walder, Will
Dunham, Deepa Babington and David Gregorio)
((luc.cohen@thomsonreuters.com; +1 646 361 1622; @cohenluc))