U.S. DOJ Wants a 20-Year Jail Term for Celsius Founder

The United States Department of Justice (DOJ) is asking for a 20-year prison sentence for Alex Mashinsky, the founder and former CEO of the infamous Celsius Network, after he admitted to committing fraud. Mashinsky is accused of misleading customers about the safety and returns of Celsius, a once-popular crypto lending platform.

Two Decades Behind Bars

Authorities say Mashinsky made false promises to Celsius users. He assured them their crypto assets were safe and that they could earn high returns by depositing their funds on the platform. But behind the scenes, Mashinsky was taking significant risks with customers’ money and manipulating the value of Celsius’ native token, CEL. He secretly sold large amounts of CEL while encouraging people to buy more, artificially driving up its price.

Celsius was known for offering interest on crypto deposits, attracting many users looking to grow their digital assets. But in June 2022, the company shocked its customers by halting withdrawals, preventing them from accessing around $7 billion in crypto assets. Just a month later, Celsius filed for bankruptcy, leaving customers frustrated and angry.

Mashinsky’s sentencing is scheduled for May 8th. As part of his guilty plea, he has agreed to forfeit over $48 million he earned from the fraud. If the court agrees with the DOJ’s recommended sentence of 20 years or less, Mashinsky will not be able to appeal it.

Celsius Begins Paying Back Creditors

While Mashinsky faces the legal consequences of his actions, Celsius is working to repay those affected by its bankruptcy. In January 2024, after exiting Chapter 11 bankruptcy, Celsius started distributing over $2.5 billion to its creditors. The money is being paid out in both cryptocurrency and cash, with the values based on cryptocurrency prices as of January 16, 2024.

The case against Mashinsky is part of a larger effort by U.S. authorities to hold crypto executives responsible for fraud. However, Celsius isn’t the only company trying to recover after a big collapse. FTX, another well-known crypto exchange, is also repaying creditors after it went bankrupt in 2022.

After its founder, Sam Bankman-Fried, was arrested on fraud charges, FTX set aside $11 billion to repay investors and institutions who lost money. Both Celsius and FTX are working to repay their debts, while regulators focus on holding their repayment crew accountable. These cases show the need for better rules and transparency in the crypto industry to protect investors.