A Harsh Sentence for Celsius Network’s Founder for Fraud

The Guilty Verdict

The industry of cryptocurrency was left shaking after the founder and previous CEO of the collapsed crypto lending platform Celsius Network, Alex Mashinsky, was hit with a 12-year prison sentence for fraud on Thursday. U.S. Southern District of New York Judge John Koeltl announced the sentence, emphasizing on the seriousness of Mashinsky’s fraudulent schemes. The agreed sentence was a compromise between the one-year-and-a-day prison term proposed by Mashinsky’s defense and the 20 years prosecutors argued for. With the sentence also included the forfeiture of $48 million and several properties owned by Mashinsky.

The Consequences

In rendering the verdict, Judge John Koeltl also stressed that the sentence, no matter how lengthy, couldn’t cure the financial loss or the mental stress that the victims suffered. Before Celsius Network’s downfall in 2022, Mashinsky was noted to have lied to investors repetitively, feeding false narratives about the safety of their deposits, the regulative approval of Celsius, and its operations. The platform was falsely represented as not making uncollateralized loans when it did, and Mashinsky manipulated the price of his CEL tokens, from which he profited over $48 million. Mashinsky’s fraudulent practices led the company into bankruptcy, creating a staggering $1.2 billion void in the company’s financials. According to prosecutors, this deficit is approximately $7 billion in today’s market price.

The Climax of the Fraud

When the firm went bankrupt, over 100 000 creditors claimed to have collectively lost $4.7 billion, according to the preliminary bankruptcy documents. Jay Clayton, the U.S. Attorney, expressed his dissatisfaction with Mashinsky’s conduct. He described Mashinsky’s tactics as using false promises to retail investors about keeping their digital assets safer than a traditional bank. However, in reality, he used those assets to place risky bets and enrich himself. To emphasize the gravity of Mashinsky’s actions, he profited tens of millions while his customers lost billions. He further stressed that despite the attractiveness of tokenization and the use of digital assets, it does not provide a license to deceive, and those who violate the rules against fraud would be held responsible in a court of law.

The Defense’s Angle

In an attempt to soften the blow, Mashinsky and his legal team tried to downplay his role in the fraud. His lawyers painted a picture of a man without a bone of malice in his body and claimed the mere suggestion of him being a fraud scheme architect was a hoax. An emotional Mashinsky expressed apologies for the harm caused and requested for forgiveness from his victims. He highlighted his humble background and how he understands the difficulty of earning, saving, and investing in cryptocurrencies.

A Paucity of Sympathy

Such apologies found little sympathy with his victims. Six of whom spoke in court, sharing their painful experiences following the collapse of Celsius Network. One creditor, Cameron Crewes, scathingly termed Mashinsky’s portrayal and the lawyers’ defense as a nightmarish minimization of the damage he caused at Celsius. Crewes highlighted the tragic reality that at least 231 Celsius creditors have passed away since its collapse, leaving no chance for recompensation. Meanwhile, others spoke of how the fraud affected their livelihoods and mental health.

The Aftermath

The victims and prosecutors also criticized Mashinsky’s lack of genuine acceptance of his actions leading to the fall of Celsius Network. Despite the disaster, Mashinsky remained stoic during the victim testimonies. When the judge announced the sentence, Mashinsky’s confusion was apparent, and he seemed surprised. He argued that he was taking responsibility for a thousand employees and felt upset about none of them taking responsibility for their actions. As per the accord of his plea agreement, Mashinsky can’t appeal his sentence. He has been ordered to report to prison in September to begin his sentence. If he completes his full sentence, Mashinsky will be 72 upon his release.