Celsius Founder Mashinsky Gets 12 Years for Crypto Fraud

• Mashinsky admitted guilt and received a 12-year sentence for his role in the Celsius collapse.
• The judge noted his past but said his actions needed strong legal punishment for fairness.
• He still faces other lawsuits over how Celsius operated and its effect on many customers.

Alex Mashinsky, the founder of Celsius Network, was sentenced to 12 years in federal prison for securities and commodities fraud, marking one of the most significant convictions stemming from the 2022 cryptocurrency market collapse. US District Judge John Koeltl handed down the sentence in a Manhattan court, rejecting both the defense’s request for leniency and the prosecution’s push for a 20-year term. 

At 58, Mashinsky faces over a decade behind bars after admitting in December to deceiving customers and manipulating the price of Celsius’s CEL token. The prosecution argued that his actions contributed directly to Celsius’s collapse, which resulted in billions of dollars in customer losses.

More than 200 victim testimonials were submitted to the court, many urging a life sentence and citing personal and financial ruin caused by Mashinsky’s actions. “Mashinsky destroyed lives,” one statement read. Still, Judge Koeltl noted mitigating factors such as Mashinsky’s military service, clean business history, and his family’s history of fleeing persecution, before declaring, “a substantial sentence is still necessary given the seriousness of the offense.”

The Rise and Fall of Celsius Network

Celsius Network attracted millions by promising double-digit returns on crypto deposits, positioning itself as a safe haven in the volatile market. However, when token values began to plummet in 2022, Celsius faced a flood of withdrawal requests it could not fulfill.

Consequently, the company declared bankruptcy, sparking lawsuits and government probes into its lending practices. The fallout extended well beyond the company’s balance sheet. Investors claimed promotional tactics misled them and falsely assured their funds were secure.

Moreover, Mashinsky’s legal troubles extend beyond his criminal sentencing. He remains entangled in a 180-page adversary court lawsuit and additional civil proceedings tied to Celsius’s bankruptcy. His role as the public face of Celsius has made him a central figure in broader investigations into crypto lender failures.

Related: SEC Ends XRP Lawsuit With Ripple in $50M Settlement Deal

A Lengthy Sentence but Lingering Questions

Clad in a black suit and blue tie, Mashinsky stood before the court and accepted responsibility, but shifted some blame. “I’m taking responsibility for 1,000 employees,” he said. “No one has come forward and admitted anything they’ve done.” His defense team argued for a sentence of one year and one day, saying anything longer was a de facto life sentence due to his age.

However, prosecutors cited widespread harm and demanded 20 years. Judge Koeltl ultimately delivered a sentence less than half of the 30-year maximum allowed under federal law. Still, the term is among the longest handed down for a crypto-related crime.

This raises one question: Can justice alone rebuild lost trust in a beleaguered cryptocurrency industry?

Mashinsky’s sentencing doesn’t mark the end of regulatory scrutiny in the crypto sector.  Regulators continue to investigate how companies such as Celsius worked, and how similar collapses could be avoided in the future.

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