Celsius Founder Faces 20-Year Sentence For $48M Fraud

Alex Mashinsky, the founder and former CEO of the now-defunct crypto lending platform Celsius, has vehemently criticized the government's request for a 20-year prison sentence, describing it as a "death-in-prison sentence." This request was made by the US Department of Justice in preparation for Mashinsky's sentencing on May 8, 2024. The DOJ's recommendation is based on Mashinsky's role in misleading Celsius users and profiting from the manipulation of Celsius' native token, CEL, which ultimately led to the platform's collapse.

Mashinsky pleaded guilty in December 2024 to two charges: commodities fraud and manipulating the price of CEL. These actions resulted in him earning $48 million by selling his holdings before Celsius' collapse in June 2022. Initially, prosecutors had filed seven charges against him in July 2023. Mashinsky's legal team argues that the DOJ's push for a 20-year sentence is disproportionate, given that their client is a nonviolent first-time offender with an unblemished 30-year business history. They contend that the DOJ has overlooked Mashinsky's background and instead portrayed him as a predator intent on harming victims and stealing their money.

The legal team further alleges that the DOJ's characterization of Mashinsky as a fraud from the outset is an exaggeration. They assert that Mashinsky is being made a scapegoat for various corporate actions, group decisions, and market fluctuations. The DOJ, however, maintains that Mashinsky's guilty plea demonstrates that his actions were deliberate and calculated, aimed at deceiving and stealing from users.

In addition to Mashinsky, former Celsius chief revenue officer Roni Cohen-Pavon also pleaded guilty to similar charges in September 2023. His sentencing, initially scheduled for December 11, 2023, has been postponed until after Mashinsky's sentencing. The delay suggests that the court is considering the interconnected nature of the charges and the potential impact of Mashinsky's sentence on Cohen-Pavon's case.

Celsius filed for Chapter 11 bankruptcy on July 13, 2022, owing $4.7 billion to creditors after halting withdrawals in June, citing volatile market conditions. In November 2023, a US bankruptcy court approved Celsius' restructuring plan to repay customers. By August 2024, $2.53 billion had been paid to 251,000 creditors, marking a significant step towards resolving the financial fallout from the platform's collapse. The restructuring plan and subsequent payments highlight the efforts to compensate victims and restore some measure of financial stability for those affected by Celsius' downfall.