Celsius Founder Faces 20-Year Jail Term Amid 70% CEL Token Surge

Alex Mashinsky, the founder and former CEO of Celsius Network, is facing up to 20 years in jail as the US Department of Justice (DoJ) pursues charges of orchestrating a years-long campaign of lies and self-dealing. Prosecutors are advocating for such a severe punishment, citing Mashinsky as an example of the repercussions of crypto misconduct.

The DoJ issued a sentencing memo on Monday, April 28, requesting a 20-year jail term for Mashinsky. The prosecution alleges that Mashinsky engaged in “deliberate, calculated” fraud, resulting in the loss of almost $7 billion in customer funds. Despite this, the CEL token, which powers the Celsius Network, has surged by over 70%.

This request comes five months after Mashinsky’s guilty plea, following fraud charges that included CEL token market manipulation and avoiding a January trial. Commodities fraud and price manipulation were among the schemes linked to Celsius’s collapse. According to the DoJ, Mashinsky has refused to accept responsibility for his actions, instead shifting blame to regulators, market conditions, and even his victims.

This case traces back to July 2023 when the US Securities and Exchange Commission (SEC) sued Celsius and Mashinsky. The SEC cited the defendants for misrepresentation of the central business model and risks to investors, misrepresentation of financial success, misrepresentation of the safety of customers’ assets on the Celsius platform, and market manipulation of Celsius (CEL) tokens. Beyond the DoJ and SEC, other agencies, including the Commodities Futures Trading Commission (CFTC), Federal Trade Commission (FTC), and the US Government, had also filed similar charges against Celsius and Mashinsky.

Notably, this happened a year after Mashinsky stepped down as CEO of Celsius. Over the years, a key highlight in the case includes Mashinsky claiming to have withdrawn $10 million ahead of the platform’s bankruptcy. However, the judge froze his assets and recently turned down his request to dismiss fraud charges.

Efforts to make victims whole have included unstaking the platform’s Ethereum (ETH) holdings. In January 2024, Celsius informed its followers on social media that it was working to compensate victims. More recently, Celsius announced the second payout to creditors, citing $127 million in Bitcoin (BTC) and US dollars based on eligibility.

Mashinsky’s sentencing is set for Thursday, May 8. If the court agrees to the DoJ’s push for a 20-year sentence, Alex Mashinsky would receive a lesser sentence than FTX’s Sam Bankman-Fried, who was sentenced to 25 years in jail.

Despite the legal troubles, the CEL token has shown resilience, surging by over 70%. This unexpected price movement highlights the complex dynamics within the crypto market, where legal developments can have a significant impact on token prices. The surge in CEL’s value suggests that investors may be betting on a potential recovery or restructuring of the Celsius Network, despite the severe legal consequences facing its founder.

This case serves as a stark reminder of the risks and potential pitfalls within the crypto industry. The severe penalties sought by the DoJ underscore the government’s commitment to holding accountable those who engage in fraudulent activities within the crypto space. As the legal proceedings continue, the fate of Celsius and its founder will remain a closely watched story in the world of cryptocurrency.