Alex Mashinsky, the founder of failed crypto lender Celsius Network, has been sentenced to 12 years in prison for defrauding hundreds of thousands of customers who were drawn in by the company’s promises of high returns on digital-asset deposits.
US District Judge John Koeltl handed down the ruling on Thursday in Manhattan, marking one of the most significant penalties to emerge from the wave of crypto collapses in 2022.
Prosecutors Demanded 20 Years, Calling Mashinsky’s Actions Deliberate and Dishonest
Mashinsky, 59, pleaded guilty in December to two counts of fraud. Prosecutors had urged the court to impose a 20-year sentence, calling him “unrepentant” and accusing him of downplaying his misconduct after entering a guilty plea.
BREAKING: Celsius founder, Alex Mashinsky, sentenced to 12 years in prison pic.twitter.com/kwwvgvQHZh
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In contrast, his attorneys requested a one-year sentence, claiming he had accepted responsibility and that the company’s failure stemmed from wider market turmoil.
Judge Koeltl rejected that argument and delivered a sentence that reflected the scale of the deception.
Celsius Claimed to Disrupt Banks, but Met Its End in a Classic Bank Run
Founded in 2017, Celsius positioned itself as a people-first alternative to traditional banks, offering unusually high yields on crypto deposits. Customers could earn double-digit returns by allowing Celsius to lend their assets to institutions. The business attracted billions in crypto deposits, but cracks emerged when the broader market began to falter in mid-2022.
As crypto prices fell and a series of scandals rattled investor confidence, Celsius customers rushed to withdraw their funds. The firm was unable to meet the demand. In June 2022, it froze withdrawals and filed for Chapter 11 bankruptcy the following month, revealing a massive hole in its finances.
Celsius Used Investor Money to Prop Up Token and Pay Promised Returns
Prosecutors accused Mashinsky of knowingly misleading customers about how safe and profitable Celsius really was. They said he directed employees to use customer deposits to pay the high yields the company had promised. At the same time, Celsius was quietly making risky, unsecured loans behind the scenes.
In addition, Mashinsky misled investors about the company’s crypto reserves. He also falsely claimed he was not selling his personal CEL token holdings. According to prosecutors, Celsius manipulated the token’s price to maintain the illusion that the company was financially strong.
Mashinsky ultimately admitted to lying about Celsius’s financial health to attract Bitcoin deposits and misleading CEL token investors about the token’s value and his personal stake. His sentencing follows the 25-year prison term handed to former FTX CEO Sam Bankman-Fried, who is currently appealing his conviction.
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