Celsius Founder Alex Mashinsky Receives 12-Year Sentence for Crypto Fraud

A US district court has sentenced Celsius founder and former CEO Alex Mashinsky to 12 years in prison for defrauding customers.

The Thursday ruling by US District Judge John Koeltl concluded that the 58-year-old crypto founder will spend the next 12 years of his life behind bars for his role in former crypto lender Celsius’ bankruptcy. Notably, Mashinsky received a reduced jail time from the 20 years that prosecutors proposed.

Mashinsky Receives Verdict for Crypto Fraud

For context, the former Celsius CEO pleaded guilty to one count of commodities and securities fraud each in December, avoiding a trial on his accusations. Prosecutors indicted him on seven charges, including two counts of wire fraud and manipulating the price of CEL, Celsius’ utility token.

After pleading guilty to defrauding customers and manipulating CEL price, his legal representative requested a mild one-year and one-day sentence. The lawyer based this argument on Mashinsky’s acceptance of responsibility for his crimes, arguing that a longer prison sentence would effectively amount to a life sentence

However, prosecutors pushed for two decades in prison, with some users affected by Celsius’ fallout recommending higher punishments. For perspective, over 200 victims sent statements to the Manhattan court requesting that Mashinsky be sentenced to life imprisonment, with many arguing that he has devastated lives.

Now, Judge Koeltl has sentenced the Celsius founder to 12 years’ imprisonment. Notably, the verdict was less than half of the 30-year maximum sentence for his crimes according to federal laws.

Bankrupt Celsius’ Inroad to Customer Repayment

The former crypto lender filed for bankruptcy in June 2022 after failing to process users’ withdrawals for weeks, citing “extreme market conditions” on the back of the Terra implosion a month before. Its Chapter 11 bankruptcy filing revealed a $1.2 billion fund deficit and $4.7 billion debt to customers, indicating a lack of deposit insurance.

Meanwhile, the lender has ongoing efforts to recuperate funds and make customers partially whole in its restructuring proceedings. After much deliberation, Celsius agreed to repay customers over $3 billion and create a Bitcoin mining company owned by its creditors and managed by miner energy infrastructure firm Hut 8.

Meanwhile, Celsius started reimbursement in February 2024, repaying some users in cash and cryptocurrencies. At press time, the restructuring process is still ongoing.