Now, founder Alexander Mashinsky is facing some real jail time after the once-promising cryptocurrency platform Celsius Network went belly up. He ultimately pleaded guilty to three federal fraud charges last December. The 59-year-old entrepreneur lured more than $20 billion from thousands of customers by promising them sound investments. Now, he’s fighting allegations of fraudulent conduct that defrauded those retail investors out of hundreds of millions of dollars.
Mashinsky’s incredible journey started life as a young boy in a small town in the then-Soviet Union’s Ukraine. At seven years old, his family fled in the opposite direction and found refuge in Israel. He would go on to be a fighter pilot and spend three years in the Israeli Defense Forces. These formative experiences fuelled his ambition and drive, ultimately propelling him to co-found Celsius Network.
From 2018 to 2022, Mashinsky lied to customers regarding the safety and security of their money. He lied about the company’s profitability and subjected customer deposits to uncollateralized loans and secretive market gambles. In 2021, he went on record to assure the public that Celsius operated with regulatory authority to do what it was doing. He understood that his claims would offer customers “misleading security.”
Despite its risky practices, Mashinsky persistently marketed Celsius, doing everything from conducting media interviews and promoting the company on social media platforms. His weekly “Ask Mashinsky Anything” sessions, broadcast on Celsius’ website and YouTube channel, further established his image as a trustworthy figure in the crypto community.
The facade crumbled as prosecutors revealed that Mashinsky manipulated the price of Celsius’ proprietary crypto token while secretly selling his own tokens at inflated prices, pocketing approximately $48 million in the process.
The government is seeking a 20 year prison term for Mashinsky. They maintain that his actions egregiously breached the public’s trust, costing customers billions in losses. They allege that his actions didn’t just reflect mismanagement, but criminal misconduct.
Mashinsky’s defense lawyers have been lobbying for a lesser sentence. In fact, as Reason reported, they claim that he should be sentenced to no more than a year and a day imprisonment. They stated that Mashinsky’s actions were part of “otherwise legitimate efforts that have crossed over into criminality as a result of unexpected difficulties.” This defense is predicated on the idea that though his motivations were initially above board, they sunk into fraud as things got tense.
While Mashinsky awaits sentencing, his case has highlighted the ripple effects of fraud in the cryptocurrency industry. The aftermath from the collapse of Celsius Network has exposed weaknesses across the industry and investor protections have come into question.
