Celsius Founder Pleads Guilty in Multi-Billion Dollar Crypto Fraud Scheme

Alexander Mashinsky, founder and former CEO of cryptocurrency platform Celsius Network, has pleaded guilty in Manhattan federal court to securities fraud and commodities fraud. The plea comes after his July 2023 arrest for defrauding thousands of investors. Celsius was one of the world's largest crypto lending platforms, managing approximately $25 billion in assets at its peak.

In court, Mashinsky told Judge John Koeltl: "I know what I did was wrong, and I want to do what I can to make it right. I accept full responsibility for my actions."

Celsius marketed itself as the "safest place for your crypto" and pushed customers to "unbank" themselves. The platform's main offering was its "Earn" program, which promised weekly reward payments to customers who deposited their crypto. The company also offered custody services and a borrowing program that allowed customers to take loans against their crypto assets.

Manhattan U.S. Attorney Damian Williams called it "one of the biggest frauds in the crypto industry," describing how Mashinsky "lured ordinary, retail crypto investors into investing billions of dollars in Celsius with false promises that their investments were low-risk."

Prosecutors detailed how Mashinsky manipulated the price of CEL, Celsius's own crypto token, through massive market purchases using customer funds without their knowledge. A damaging internal message from former Chief Revenue Officer Roni Cohen-Pavon to Mashinsky revealed the scheme: "The value was fake" and cost about $8 million weekly to maintain.

While publicly urging investors to hold CEL tokens and claiming he wasn't selling, Mashinsky secretly cashed out $48 million worth of his own holdings at artificially inflated prices. He also withdrew $8 million in other cryptocurrencies while repeatedly assuring customers about Celsius's strong financial position and liquidity.

"In reality, Celsius was never profitable. To disguise the flaws in his business model, Mashinsky put investors’ money into riskier and riskier bets, and secretly used customer money to prop up the price of CEL token."

The collapse came swiftly. On June 12, 2022, Celsius halted all customer withdrawals, leaving approximately $4.7 billion in assets frozen on the platform. A month later, the company filed for Chapter 11 bankruptcy. The company has since entered into a non-prosecution agreement with prosecutors and pledged to continue cooperating with authorities.

Mashinsky faces up to 30 years in prison on the combined charges. Sentencing is set for April 8.

The FBI led the investigation, with the SEC and CFTC filing parallel civil suits. Cohen-Pavon, who earlier pleaded guilty to market manipulation charges, awaits sentencing.