Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Alex Mashinsky, founder of collapsed crypto lender Celsius Network, was sentenced to 12 years in prison after admitting his role in a scheme to defraud customers and manipulate a token using customer funds.
Mashinsky pleaded guilty to securities fraud and commodities fraud in December. Federal prosecutors in New York said he lured customers with promises of high returns on digital deposits, while misleading them about Celsius’s operations and using their deposits to drive up the price of its own crypto token, CEL.
At its peak, Celsius held $25bn in customer assets. But the bank was buffeted by volatility in crypto markets in 2022, and hundreds of thousands of clients were unable to recover their funds after it halted withdrawals.
District Judge John Koeltl of the Southern District of New York sentenced 59-year-old Mashinsky on Thursday. Mashinsky previously agreed to forfeit more than $48mn, representing his personal proceeds from the sale of CEL tokens before it crashed. His bank accounts were frozen by US authorities after his indictment in 2023.
The sentencing comes as US President Donald Trump has courted the crypto industry, launched his own token and softened the administration’s approach to enforcement and oversight of digital assets. In March he pardoned the company behind the crypto exchange BitMEX — which last year pleaded guilty to violating the Bank Secrecy Act in relation to anti money-laundering controls. In addition, new justice department policies prohibit prosecution of crypto companies for the actions of their users.
“The case for tokenisation and the use of digital assets is strong but it is not a licence to deceive,” Jay Clayton, US attorney for the Southern District of New York, said in a statement. “The rules against fraud still apply, and the SDNY will hold those who flout them accountable for their crimes.”
Prosecutors had asked for a 20-year prison term, saying in a filing last month that Mashinsky was “a fraudster of epic proportions” and that “a severe sentence is warranted”.
Mashinsky told a court in December that “what I did was wrong and I want to do what I can to make it right” and said he accepted full responsibility for his actions.
In a court filing last week, Mashinsky said the sentence should be no more than 366 days. He accused the government of making a “venom-laced submission” to the court and said he was a “first time, non-violent offender who pleaded guilty and accepts responsibility”.
The filing said he was “chastened and humbled” and was “tortured every day by his misdeeds and the pain he caused”.
Mashinsky was arrested and charged in 2023. His company had filed for bankruptcy the previous year, after a crypto market rout.
Prosecutors said Mashinsky had presented Celsius as a “modern day bank” but that it had been a “risky investment fund”, and that Celsius had used some customers’ money to manipulate the market for its CEL token, allowing it to sell its own holdings above their market value.
