The long-awaited criminal trial of former Celsius Network CEO, Alex Mashinsky, is set for September 17, 2024. Mashinsky faces serious fraud and manipulation charges that led to major financial losses for Celsius customers.
While he maintains his innocence, the details of the case paint a concerning picture.
The charges stem from Mashinsky’s time leading Celsius Network, a cryptocurrency lending platform. Founded in 2017, Celsius marketed itself as a place where customers could deposit their crypto and earn attractive interest rates paid out weekly. Behind the scenes, however, regulators allege the company engaged in excessively risky practices that ultimately left it unable to meet withdrawal demands.
In mid-2022, the crypto market downturn caused panic among Celsius customers. A bank-run style surge of withdrawal requests left the company frozen and insolvent. Just weeks later, Mashinsky resigned as CEO. Soon after, Celsius filed for bankruptcy, leaving customers unable to access billions of dollars in deposits. Although, at the time of writing, customers are in line to get most of their funds back.
Regulators quickly initiated fraud investigations into Mashinsky and Celsius. In September 2023, the Department of Justice formally indicted Mashinsky on several criminal counts including wire fraud and conspiracy to commit wire fraud. Prosecutors say he knowingly misled customers, falsely marketing Celsius as a “safe” interest-bearing account while concealing extreme risks.
Additionally, Mashinsky faces civil charges from agencies like the U.S. Securities and Exchange commission (SEC ) accusing him of manipulating the price of Celsius’ CEL token to profit at customers’ expense. The alleged scheme involved using customer assets to pump up CEL prices before dumping his own tokens.
On July 12, the U.S. Federal Trade Commission announced that it had reached a deal with Celsius. It found that the company had falsely claimed it had “more than enough” assets to satisfy customer obligations, even as it approached bankruptcy. However, its former CEO, Alex Mashinksy, is still on the hook.
While Mashinsky has strongly denied any criminal wrongdoing, the trial will likely involve testimony from investigators and former Celsius insiders supporting the charges. With substantial evidence and victim impact statements, prosecutors will aim to convince the jury of intentional fraud by the disgraced CEO.
For his part, Mashinsky has hinted at a defense disputing whether crypto deposits qualify as unregistered securities, according to a September 11 filing . However, legal experts say successfully making this argument could prove difficult given the nature of Celsius’ business model and marketing.