Cash News
Alex Mashinsky, the founder of bankrupt cryptocurrency lender Celsius Network, said on Tuesday he intends to plead guilty to two counts of fraud.
The former CEO, 59, was indicted in July last year on seven counts of fraud, conspiracy and market manipulation charges. Federal prosecutors in Manhattan said he misled customers of Celsius to persuade them to invest, and artificially inflated the value of his company’s proprietary crypto token. He pleaded not guilty later that day.
US district judge John Koeltl in November denied a motion by Mashinsky to dismiss two criminal counts ahead of his trial, which had been slated for 28 January.
On Tuesday, during a hearing before Koeltl, Mashinsky said he agreed to plead guilty to two out of the seven counts he was initially charged with: commodities fraud, and a fraudulent scheme to manipulate the price of CEL, Celsius’ in-house token.
Mashinsky was one of several crypto moguls to be charged with fraud after a slump in crypto prices in 2022 caused a number of companies, including now-bankrupt exchange FTX, to collapse. FTX’s founder Sam Bankman-Fried was convicted of stealing roughly $8bn from the exchange’s customers in November 2023 and sentenced in March to 25 years in prison.
Celsius was among the first in a series of bankruptcies in the cryptocurrency sector in 2022 as token prices cratered amid rising interest rates and stubbornly high inflation. It filed for bankruptcy shortly after Singapore-based crypto hedge fund Three Arrows Capital and rival crypto lender Voyager Digital did so.
Federal prosecutors in Manhattan accused Mashinsky and Celsius’ former chief revenue officer, Roni Cohen-Pavon, with manipulating the market for the company’s crypto token, known as Cel. Cohen-Pavon pleaded guilty in September 2023 and agreed to cooperate with prosecutors’ investigation.
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Prosecutors have said Mashinsky also personally reaped approximately $42m in proceeds from selling his holdings of the Cel token.
Founded in 2017, Celsius filed for chapter 11 bankruptcy protection in July 2022 after customers rushed to withdraw deposits as crypto prices fell. Many were initially unable to access their funds. The company exited bankruptcy on 31 January, and has pivoted to Bitcoin mining.
Crypto lenders such as Celsius grew rapidly as crypto prices surged during the Covid pandemic. They promised easy loan access and eye-popping interest rates to depositors, then lent out tokens to institutional investors, hoping to profit from the difference.