Celsius Network's Founder Imprisoned for 12 Years
In a landmark judgment, Alex Mashinsky, the founder and former CEO of Celsius Network, was sentenced to 12 years in federal prison in July 2025 for commodities and securities fraud related to Celsius's collapse.
Mashinsky was found guilty of misleading customers about the safety of Celsius and artificially inflating the value of its proprietary token, Cel, which helped him draw more than $48 million in personal benefits while causing billions in losses to investors. He pleaded guilty to one count each of commodities fraud and securities fraud.
Celsius, a cryptocurrency lending platform founded in 2017, promised high interest rates (up to 17%) to depositors by lending tokens to institutional investors. However, the company had a $1.19 billion deficit on its balance sheet when it filed for Chapter 11 bankruptcy in July 2022 after cryptocurrency prices crashed and customers rushed to withdraw deposits.
The fraud case highlights how Celsius portrayed itself as safe while engaging in deceptive business practices, violating federal securities and commodities laws. Prosecutors sought a sentence of at least 20 years, but Mashinsky requested a lighter one-year term, expressing remorse and a wish to make amends. His sentence includes three years of supervised release and a $48.4 million forfeiture.
The bankruptcy proceedings revealed contentious issues with related parties such as stablecoin issuer Tether, which Celsius accused of improperly liquidating billions of dollars worth of Bitcoin collateral in breach of contract during Celsius’s insolvency process.
At its peak, Celsius held $25 billion in assets. However, the company's downfall led to approximately $4.7 billion in customer funds being locked up at the time of bankruptcy. The funds remained inaccessible for 18 months until the bankruptcy was resolved in early 2024. Some customers were reported to be homeless or suicidal during the 18-month wait.
It's important to note that this is not an isolated incident in the cryptocurrency industry. Sam Bankman-Fried, the founder of FTX, was sentenced to 25 years for seven counts of fraud and conspiracy in a separate case. Do Kwon, the founder of Terra/Luna, is currently facing up to 130 years in prison for similar charges. Changpeng Zhao, the founder of Binance, served four months in federal prison last year.
Mashinsky was also accused of manipulating Celsius' native token, CEL, as part of a years-long scheme. He was ordered to pay a $50,000 fine in addition to his prison sentence.
This case serves as a stark reminder of the importance of transparency and honesty in the financial industry, regardless of the platform or technology being used. As the cryptocurrency market continues to grow, it's crucial that companies adhere to federal securities and commodities laws to protect investors and maintain trust in the system.
[1] New York Times: Alex Mashinsky Sentenced to 12 Years in Prison for Celsius Fraud
[2] Wall Street Journal: Celsius Founder Alex Mashinsky Sentenced to 12 Years in Prison
[3] Bloomberg: Celsius Accuses Tether of Improperly Liquidating Bitcoin Collateral
[4] Reuters: Celsius Files for Bankruptcy, Citing Liquidity Issues
- Despite promising high returns through the use of technology in its cryptocurrency lending business, Celsius Network's founder, Alex Mashinsky, was sentenced to 12 years in federal prison due to commodities and securities fraud.
- The downfall of Celsius exemplifies the need for companies in the tech-driven cryptocurrency industry to abide by federal securities and commodities laws, ensuring investor protection and maintaining trust in the system.
