Alex Mashinsky, the founder of failed cryptocurrency platform Celsius, was recently sentenced to 12 years in prison. The ruling was handed down by a federal judge of the Southern District of New York. Earlier this year, for instance, Celsius Network CEO Alex Mashinsky pleaded guilty to two counts of commodities fraud and securities fraud. This judgment shows the marketing lies that tricked thousands of consumers.
In an unexpected twist, Mashinsky’s defense lawyers based their request for a custodial sentence on 366 days. Given these extraordinary circumstances, they petitioned their client not to receive a protracted jail sentence. In short, the court found that a greater sanction was warranted. They made this difficult decision as a result of the extraordinary damage done by his actions.
Mashinsky’s legal woes started when he falsely portrayed Celsius as a “new kind of bank.” In reality, the platform operated like a high-risk hedge fund. Under these fraudulent claims, he lured customer deposits, building up a balance sheet of over $25 billion in assets by the end of 2021. Prosecutors charge that, in the process, he turned clients into unsuspecting backers of a business much more hazardous than he had ever revealed.
When the crypto market crashed, Celsius’ house of cards fell and the company was forced to declare bankruptcy. The collapse of the Terra stablecoin and its paired token Luna added fuel to that fire, opening up a close to billion-dollar hole in Celsius’s balance sheet. In July 2022, the company declared bankruptcy, leaving more than $4.7 billion of customers’ money effectively frozen.
At the sentencing hearing, Mashinsky admitted to misleading customers about his wrongdoing. He lied to them about fundamental aspects of how their money was to be invested. Prosecutors argued that his claims went beyond honest misrepresentations. They weren’t unfortunate mistakes, they were intentional decisions taken to do what was in their own best interest.
“His crimes were not the product of negligence, naivete, or bad luck. They were the result of deliberate, calculated decisions to lie, deceive, and steal in pursuit of personal fortune,” – Prosecutors.
The court further pointed out that Mashinsky artificially inflated the price of a company cryptocurrency, Celsius, to benefit himself financially. In his plea agreement, as a condition of his sentence, he agreed to forfeit $48 million to the Department of Justice.
Katherine Reilly, a member of the prosecution’s team on the federal side, closed by accentuating the obviousness of Mashinsky’s illegal acts. She noted, “Where there has been a plea, to the extent that there are factual disputes, they are often relatively minor, and the core of the conduct is clear.” Nonetheless, she admitted that on the defense’s part, there was an effort to downplay the breadth of his wrongdoing.
Defense attorney Timothy Howard said those are the intricacies that come into play when considering sentencing. He stated, “It’s a complicated patchwork of facts to put together to come to a just sentence.” He referenced the strategic decisions lawyers must make during such cases: “You need to balance advocating for your client with the lowest sentence possible while maintaining some credibility with the judge.”
Prosecutors pointed to Mashinsky’s apparent lack of remorse, claiming it highlights the continued threat he represents. They stated that he has “abandoned all pretense of acknowledging his sustained wrongdoing.”
As Mashinsky addressed the court before his sentencing, he broke down and cried. He sought mercy and grace for his evils. His emotional appeal cut against the grain of his previous, white hot criticisms of legacy banking institutions. As he infamously once said, “Banks are not your friends,” and he vigorously promoted this philosophy while running Celsius.
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