Alex Mashinsky, US-based co-founder and former CEO of Celsius Network, has faced extensive legal scrutiny following the collapse of his crypto lending platform in 2022. Multiple U.S. federal and state agencies have brought both civil and criminal actions against Mashinsky and Celsius, alleging widespread fraud, misrepresentation, and market manipulation that resulted in billions of dollars in losses for retail investors.
Context: The Collapse of Celsius Network
- Celsius Network was once a leading crypto lending platform, managing up to $25 billion in assets at its peak.
- In June 2022, Celsius abruptly froze customer withdrawals due to a severe liquidity crisis, which was exacerbated by the broader crypto market downturn and the collapse of the Terra/LUNA ecosystem.
- In July 2022, Celsius filed for Chapter 11 bankruptcy, revealing a $1.3 billion deficit and leaving over 100,000 customers unable to access approximately $4.7 billion in crypto assets.
- Bankruptcy proceedings led to a restructuring plan, with partial repayments to customers beginning in early 2024.
Criminal Charges and Mashinsky’s Guilty Plea
- On July 13, 2023, Mashinsky was arrested and indicted on seven counts, including securities fraud, commodities fraud, wire fraud, conspiracy, and market manipulation.
- Prosecutors alleged Mashinsky misled investors about the safety and regulatory status of Celsius’s products, especially the “Earn” program, and manipulated the price of Celsius’s native token (CEL) for personal gain.
- Mashinsky initially pleaded not guilty, but on December 3, 2024, he pleaded guilty in Manhattan federal court to two counts: commodities fraud and securities fraud.
- He admitted to providing false reassurances about regulatory approval for Celsius’s Earn program and failing to disclose his personal sale of CEL tokens while manipulating their price.
- Mashinsky agreed to forfeit over $48 million in proceeds and faces up to 30 years in prison.
Sentencing Update (April 2025)
Mashinsky’s sentencing was originally scheduled for April 8, 2025. However, his legal team has requested a one-month delay to May 8, 2025, citing the need for more time to prepare their sentencing submission. Federal prosecutors have opposed a full month’s delay, offering only a one-week extension. As of now, the court has not ruled on the motion, and the sentencing date remains undecided pending the court’s decision.
Civil and Regulatory Actions
- SEC: Charged Celsius and Mashinsky with unregistered securities offerings, fraud, and market manipulation. The SEC sought injunctions, officer/director bans, and monetary penalties. Celsius agreed to cooperate and accepted a permanent injunction against future violations.
- FTC: Reached a $4.7 billion settlement with Celsius and permanently banned the company from handling consumer assets, citing deceptive practices.
- New York Attorney General: Filed a civil lawsuit against Mashinsky in January 2023 for defrauding investors, seeking damages, restitution, and a ban from doing business in New York.
- Georgia Department of Banking and Finance: Issued a cease and desist order against Mashinsky for operating without a money transmitter license.
Key Allegations and Findings
- Mashinsky and Celsius misrepresented the safety, profitability, and regulatory status of their products to attract retail investors.
- They engaged in market manipulation by artificially inflating the price of CEL tokens, enabling Mashinsky to profit by selling his holdings at elevated prices while customers suffered losses.
- Internal warnings about misleading statements were ignored, and customer funds were used to prop up the business and token price.
- A court-appointed examiner’s report described Celsius as operating akin to a Ponzi scheme since its launch.
Aftermath and Customer Impact
- Celsius’s bankruptcy left over 100,000 creditors owed $4.7 billion.
- Customers began receiving partial repayments in early 2024, though only about 60% of their initial losses have been recovered.
- Mashinsky’s guilty plea and forfeiture of assets are part of ongoing efforts to recover funds for defrauded investors.
Summary Table: Key Legal Proceedings
| Agency/Court | Action Against Mashinsky & Celsius | Outcome/Status |
|---|---|---|
| DOJ (Criminal) | Fraud, conspiracy, market manipulation | Mashinsky pleaded guilty to 2 counts; sentencing pending; forfeiture of $48M |
| SEC | Securities law violations, fraud, manipulation | Permanent injunction, penalties sought; Celsius cooperated |
| FTC | Deceptive practices, consumer fraud | $4.7B settlement; Celsius banned from handling assets |
| NY Attorney General | Civil securities fraud | Lawsuit seeking damages, restitution, business ban |
| Georgia Dept. of Banking | Unlicensed money transmission | Cease and desist order issued |
Conclusion
The legal fallout from Celsius Network’s collapse has been one of the most significant in the history of the crypto industry. Alex Mashinsky’s guilty plea and the ongoing regulatory actions underscore the widespread fraud, market manipulation, and investor deception that led to billions in customer losses. The final sentencing of Mashinsky is pending, with a possible delay, as the courts continue to address the aftermath of one of crypto’s most notorious failures.
