Celsius Network Founder Alex Mashinsky Sentenced to 12 Years for Crypto Fraud in New York

Alex Mashinsky, founder and former CEO of Celsius Network, was sentenced to 12 years in federal prison by U.S. District Judge John G. Koeltl in New York. This follows his December 2024 guilty plea to commodities and securities fraud. Mashinsky misled investors about Celsius's operations and manipulated the company's crypto token price for personal gain. He was also ordered to pay a $50,000 fine and forfeit $48.4 million. The case is part of broader regulatory actions against crypto fraud, including a $4.7 billion FTC settlement with Celsius.

A Fraudulent Vision of Financial Freedom

Founded in 2017, Celsius Network marketed itself as a revolutionary alternative to traditional banking. Mashinsky, a charismatic entrepreneur, promised customers that their digital assets would be safer with Celsius than in a bank. The platform offered eye-catching interest rates—up to 18%—on crypto deposits, attracting a massive user base during a time when traditional banks offered minimal returns.

By 2021, Celsius claimed to hold over $25 billion in customer assets. But behind the scenes, prosecutors say, the company was operating more like a high-risk hedge fund than a secure financial institution. According to the Department of Justice, Mashinsky used customer deposits to make risky investments and to enrich himself, all while falsely assuring users that their funds were safe and fully backed.

The Charges and Guilty Plea

Mashinsky was arrested on July 13, 2023, the same day Celsius agreed to a $4.7 billion settlement with the Federal Trade Commission (FTC)—one of the largest in the agency’s history. The FTC settlement, which remains contingent on Celsius returning remaining customer assets through bankruptcy proceedings, underscored the scale of the alleged fraud.

Initially charged with seven counts, including securities fraud, commodities fraud, wire fraud, and market manipulation, Mashinsky ultimately pleaded guilty to two counts: commodities fraud and securities fraud. As part of his plea agreement, he admitted to deceiving customers about how their funds would be used and to manipulating the price of Celsius’s native token, CEL, for personal financial benefit.

In addition to the 12-year prison sentence, Mashinsky, 59, was ordered to serve three years of supervised release, pay a $50,000 fine, and forfeit $48.4 million to the U.S. government.

Courtroom Reckoning

The sentencing hearing, held in Manhattan’s federal courthouse at 500 Pearl Street, featured emotional testimony from former Celsius customers who described the devastating financial and emotional toll of their losses. Many had entrusted their life savings to the platform, believing Mashinsky’s repeated assurances that Celsius was a safer, more transparent alternative to traditional finance.

Mashinsky, visibly emotional, addressed the court before sentencing. He apologized to his victims and asked for forgiveness, citing his military service in Israel and a difficult childhood as mitigating factors. His legal team had requested a custodial sentence of just over a year—366 days—arguing that external market conditions contributed to Celsius’s collapse. Judge Koeltl rejected the leniency request, emphasizing the deliberate and sustained nature of Mashinsky’s deception.

Parallel Civil Actions and Regulatory Fallout

The criminal case against Mashinsky was accompanied by parallel civil actions from the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Both agencies accused Mashinsky and Celsius of orchestrating a multi-billion-dollar fraud scheme that misled investors and violated federal securities and commodities laws.

U.S. Attorney Jay Clayton, who led the prosecution, stated: “Alexander Mashinsky targeted retail investors with promises that he would keep their digital assets safer than a bank, when in fact he used those assets to place risky bets and to line his own pockets. In the end, Mashinsky made tens of millions of dollars while his customers lost billions.”

Clayton praised the investigative work of the FBI and acknowledged the contributions of the SEC and CFTC in building the case.

The $4.7 Billion FTC Settlement

The July 2023 settlement between Celsius and the FTC was a landmark moment in the case. The agreement prohibits Celsius and its affiliates from handling consumer assets and requires the company to return what remains of customer funds through bankruptcy proceedings. The $4.7 billion figure reflects the estimated losses suffered by Celsius users, many of whom were retail investors lured by the promise of high returns and financial independence.

The FTC’s complaint alleged that Celsius and Mashinsky misrepresented the platform’s financial health and failed to disclose the risks associated with its business model. The settlement does not absolve Mashinsky of personal liability, and the agency continues to pursue enforcement actions against him individually.

A Broader Pattern of Crypto Fraud

Mashinsky’s sentencing adds to a growing list of high-profile crypto executives facing legal consequences for fraudulent conduct. His case follows the conviction and 25-year sentence of FTX founder Sam Bankman-Fried, who was found guilty of misappropriating billions in customer funds. Other notable cases include Binance founder Changpeng Zhao, who received a four-month sentence for enabling money laundering, and Terraform Labs’ Do Kwon, who faces fraud charges in the U.S. after the collapse of his algorithmic stablecoin project.

While each case is distinct, they share common themes: the exploitation of regulatory gray areas, the targeting of retail investors, and the use of complex financial instruments to mask unsustainable business practices.

Celsius Network Founder Alex Mashinsky Sentenced to 12 Years for Crypto Fraud in New York

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Celsius Founder Alex Mashinsky Sentenced to 12 Years for Multi-Billion-Dollar Crypto Fraud