- Celsius customers lost billions as Alex Mashinsky allegedly lied about the safety of their deposits.
- Mashinsky sold $48M in CEL tokens while publicly claiming to hold assets like his users.
- Celsius went bankrupt in 2022, leaving $4.7B in user funds locked and many without access.
Alex Mashinsky, once a popular figure behind Celsius Network, is now standing at the center of one of the most high-profile crypto fraud cases to date. The U.S. Department of Justice (DOJ) is seeking a 20-year prison sentence for the disgraced founder.
Prosecutors cite his “deliberate, calculated” actions that led to billions in customer losses. His sentencing is now scheduled for May 8 and will be a major spectacle, not just for Mashinsky, but for the rest of the crypto industry.
Crypto Leader Turned Cautionary Tale
Celsius Network was founded in 2017 and rode the crypto boom during this time. It marketed itself as a user-friendly alternative to traditional banks and offered attractive returns of up to 18% annually through its popular “Earn” program. Users could deposit crypto like Bitcoin and Ethereum and watch their balances grow, at least on paper as things eventually turned out.
Alex Mashinsky, the venture’s CEO, sometimes presented himself as a forward-thinking leader working to expand financial access. He frequently told users he was “HODLing” alongside them, reinforcing a shared commitment to the platform’s mission.
At the company’s peak in 2021, Celsius managed over $20 billion in crypto assets from retail users around the world. Behind the scenes, however, a very different story was playing out.
The Scam Underneath
Federal prosecutors allege that the Celsius empire was built on lies. The DOJ’s sentencing memo shows that Mashinsky masterminded one of the largest crypto fraud cases in history. Mashinsky also deliberately misled customers about the safety of their deposits.
Instead of handling customer assets responsibly, Celsius engaged in practices such as issuing loans without collateral, misusing funds, and placing high-risk trades. The firm also covertly utilized user deposits to artificially boost the price of its native CEL token.
Celsius also publicly assured customers that their money was safe, while Mashinsky quietly cashed out. He personally sold over $48 million worth of CEL tokens at these artificially inflated prices, according to prosecutors. These actions were a direct contradiction of his claims that he was HODLing for the long term.
Mashinsky’s manipulation eventually led to the company’s downfall and in July 2022, Celsius filed for Chapter 11 bankruptcy when the bear market hit. Customers reportedly deposited their life savings into the platform, and found themselves unable to access their funds. At the time of the bankruptcy, around $4.7 billion in customer funds were locked inside the platform.
The $7 Billion Fallout
Since then, the damage has only worsened. According to prosecutors, if you adjust for the recent comeback in crypto prices, the real losses now approach $7 billion.
Even after pleading guilty to two counts of fraud in December 2024, as well as commodities fraud and price manipulation of the CEL token, Mashinsky continues to deflect blame. Court documents show that he refuses to take responsibility, and is instead pointing fingers at regulators, market conditions and even his own customers.
The DOJ is standing on its position that Mashinsky’s sentence should be as serious as his crimes. They argue that leniency could make others in the space bolder and risk further trust erosion within the crypto space. At 59, Mashinsky could spend the rest of his life in prison if the DOJ’s request is granted.
He has agreed on the terms of his plea agreement to waive his right to appeal a sentence of 30 years or less. The crypto community is expected to stake its attention on the verdict which is expected on May 8, from judge John G. Koeltl.
