DOJ Seeks 20-Year Sentence for Celsius Founder Mashinsky

The U.S. Department of Justice (DOJ) has filed a motion seeking a 20-year prison sentence for Alex Mashinsky, the founder and former CEO of the now-defunct cryptocurrency lending platform Celsius Network. The DOJ's request comes after Mashinsky pleaded guilty in December to misrepresenting the safety of customer deposits and manipulating Celsius's CEL token. The DOJ's sentencing memo, filed in federal court, alleges that Mashinsky's actions caused significant harm to investors and the broader cryptocurrency market.

At its peak in 2021, Celsius managed more than $20 billion in customer crypto assets. Mashinsky aggressively marketed the platform as a safe alternative to banks, promising high yields and low risk. However, prosecutors allege that these promises were false. Celsius took uncollateralized loans, made risky trades, and secretly used customer assets to manipulate the price of its CEL token—all while publicly assuring customers their funds were safe. Mashinsky personally sold over $48 million worth of CEL at inflated prices, even as he told customers he was "HODLing" alongside them. When Celsius collapsed into bankruptcy in July 2022, about $4.7 billion in customer funds were trapped. Post-bankruptcy, customers were left with a shortfall exceeding $1 billion. Adjusting for today's crypto prices, prosecutors estimate the total loss is closer to $7 billion.

Prosecutors argue that Mashinsky's crimes were not the result of negligence or bad luck but were deliberate, calculated decisions to lie, deceive, and steal in pursuit of personal fortune. They contend that Mashinsky refuses to accept responsibility for his crimes and continues to shift blame to regulators, market conditions, and even his victims. The DOJ warns that anything less than a significant prison sentence would fail to reflect the gravity of Mashinsky’s conduct, undermine respect for the law, and send the wrong message to other crypto executives tempted to chase personal enrichment at the expense of their customers.

Mashinsky's defense team has argued that the DOJ's request for a 20-year sentence is excessive and that their client's actions were not driven by malicious intent. They have also pointed to Mashinsky's cooperation with authorities and his efforts to make amends with investors as mitigating factors. However, the DOJ has maintained that Mashinsky's cooperation was limited and that his efforts to make amends have been insufficient to address the harm he caused.

The sentencing hearing for Mashinsky is scheduled to take place on May 8. The outcome of the hearing will have significant implications for the cryptocurrency industry, as it will set a precedent for how regulators and law enforcement agencies handle cases of fraud and misconduct in the sector. The case also highlights the need for greater transparency and accountability in the cryptocurrency industry, as well as the importance of regulatory oversight to protect investors from fraudulent activities.