Alexander Mashinsky, the founder and former CEO of Celsius Network, has pleaded guilty to two serious crimes: fraud and market manipulation. These crimes are linked to two major schemes that caused billions of dollars in losses. Mashinsky’s actions misled thousands of people, most of whom were regular investors hoping to earn money through cryptocurrencies. His actions have now led to significant legal consequences, including the potential for decades in prison.
What Happened at Celsius?
Celsius Network was a popular platform in the cryptocurrency world. It allowed customers to deposit their crypto assets with the promise of earning rewards. The company claimed it was a “safe” place for people to store their crypto and offered a way to earn money without the risks of traditional banking. However, this was far from the truth.
Mashinsky, who was in charge of Celsius, made false statements to attract more customers. He told people that the company was highly profitable and that their crypto investments were low-risk. In reality, the company was not making money as promised. Instead, Celsius was losing money, and to hide this, Mashinsky made risky investments with customers’ funds.
Despite the losses, Mashinsky continued to promote Celsius as a stable and trustworthy platform. At one point, the company was holding about $25 billion in assets, growing rapidly as more people trusted it. Unfortunately, many of these customers were everyday investors rather than big institutions, and they were the ones who suffered the most when the company’s problems became clear.
Manipulating the Price of CEL Token
In addition to misleading customers about the company’s financial health, Mashinsky was involved in another illegal scheme. He manipulated the price of Celsius’s own cryptocurrency token, CEL, to make it seem more valuable than it actually was. Celsius used large amounts of customer money to buy up CEL tokens, which artificially boosted the price.
Mashinsky and his team kept this manipulation secret from the public. By controlling the price of CEL, Mashinsky was able to sell his own holdings at a much higher value than what they were really worth. This allowed him to pocket millions of dollars in profits while the value of the token was being propped up by the company’s own purchases.
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The price manipulation became so extreme that, at one point, the company was spending around $8 million every week to keep the price of CEL high. Mashinsky was aware that the inflated value was fake. One of his colleagues even admitted in a private message that the price was being held up by these huge, artificial purchases. Without these actions, the price of CEL would have been much lower, leading to massive losses for investors.
The Collapse of Celsius
In June 2022, Celsius’s illegal activities began to catch up with it. The company announced that it would halt all customer withdrawals, meaning people couldn’t access the money they had deposited with Celsius. At that time, Celsius owed billions of dollars to customers, many of whom were retail investors who had trusted the platform with their crypto. This caused panic and frustration, especially when it was revealed that Celsius had been using customer money for its own benefit.
Just one month later, in July 2022, Celsius filed for bankruptcy, confirming that the company had collapsed. It was clear that Mashinsky’s actions had led to the downfall of the company. Many customers lost their savings, and the company was left with a huge debt it could not pay back.
Mashinsky’s actions have now been officially recognized as crimes. He has pleaded guilty to two charges: one for commodities fraud and another for securities fraud. These crimes carry a maximum sentence of 30 years in prison, though the final sentence will be decided by the judge. Mashinsky is scheduled to be sentenced in April 2024.
The case has sent a strong message about the importance of honesty and transparency in the world of finance, especially when it comes to emerging industries like cryptocurrency. As the legal process continues, it is clear that the consequences of Mashinsky’s actions will have a lasting impact on the crypto industry and its customers.
