Celsius founder pleads guilty to manipulating the exchange rate of the native token CEL

What’s new? Alex Mashinsky, the founder and former CEO of the bankrupt lending crypto platform Celsius, has admitted to part of the charges brought against him by US authorities. At a court hearing, he pleaded guilty to two of seven counts: commodity fraud and conspiracy to manipulate the price of the Celsius (CEL) native token.

Material by Reuters

What else is known? “I know what I did was wrong, and I want to try to do whatever I can to make it right,” Mashinsky said in court on Tuesday, December 3.

Celsius, which launched in 2017, gained popularity sharply amid a crypto market rally during the coronavirus pandemic as it offered high deposit rates and favorable lending terms. At its peak, the platform had more than $25 billion in assets under management, according to management.

It lent customer deposits to institutional investors, but after the market collapse in 2022, customers began withdrawing funds en masse, exposing the platform’s insolvency. In June, it froze withdrawals, citing “extreme market conditions.”

The management tried to restructure the company but was unable to attract external investment — reportedly due to the refusal to provide financial statements — after which it filed for bankruptcy in July. It was then revealed that Celsius’ debts exceeded its assets by $1,2 billion.

A series of accusations from investors and partners followed the platform’s collapse. Thus, the company provider of staking and investment software KeyFi accused Celsius of violating the partnership agreement and creating a Ponzi scheme, followed by a group of investors who also claimed that the platform could only maintain the promised rate of return by constantly attracting new customers.

In the course of these proceedings, it emerged that Celsius lost hundreds of millions of dollars of its customers’ money on high-risk schemes. It was also revealed that Mashinsky, who resigned in September 2022, withdrew $10 million from the platform on the eve of its bankruptcy.

In January 2023, New York Attorney General Letitia James filed a lawsuit against Mashinsky for defrauding “hundreds of thousands of investors” of billions of dollars. The investors include more than 26 000 state residents.

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Mashinsky was arrested a year later, in July 2023. Four federal agencies indicted him at once: the DOJ, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC). The company’s chief revenue officer, Roni Cohen-Pavon, was arrested at the same time.

Among other things, it was alleged that the platform made misleading statements to induce investors to buy CEL tokens and make deposits into a revenue-generating program, and inflated its financials, made unsecured loans, and misappropriated customer assets.

The FTC later fined Celsius $4,7 billion and permanently banned senior executives from “offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets.”

In September 2023, Roni Cohen-Pavon, who was released on $500 000 bail, pleaded guilty to four charges including manipulating the price of CEL. He agreed to cooperate with prosecutors and the FBI in their platform investigation and to testify in court if necessary.

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As for Mashinsky, in November 2024, Judge John Koeltl denied his attorneys’ motion to dismiss the two charges.

In court on December 3, he admitted to giving clients a “false comfort” through his public statements. As an example, Mashinsky cited his 2021 interview where it was stated that Celsius’ deposit income program had received regulatory approval, which in reality was not the case. He also admitted that he failed to disclose the sale of his savings in CEL tokens.

As part of the deal with prosecutors, Mashinsky agreed not to appeal the sentence if it amounted to 30 years in prison or less, the maximum he faces on the two counts.

“Sometimes, accepting responsibility when and where appropriate is the best way to help everybody move on,” Mashinsky’s lawyer Marc Mukasey told reporters after the hearing.

Manhattan District Attorney Damian Williams said the defendant made about $42 million from selling his savings in CEL at artificially inflated prices, while his clients were left with nothing when the company went bankrupt.