(Bloomberg) -- Alex Mashinsky, the charismatic co-founder of crypto lender Celsius Network, pleaded guilty to two counts of fraud in one of the last cases stemming from the widespread upheaval that shook digital currencies two years ago.
Mashinsky, 59, was charged last year with artificially inflating the price of his platform’s CEL token in a bid to attract customers, generating $42 million in personal profits. He changed his plea to guilty at a hearing in Manhattan Tuesday.
The collapse of Celsius was one of the earliest harbingers of what became known as crypto winter, a series of events that wiped billions of dollars in value from the global digital-asset market. The company was one of several high-profile crypto firms, including Sam Bankman-Fried’s FTX, that imploded in 2022.
“I knew what I did was wrong and I want to do whatever I can to make it right,” Mashinsky told US District Judge John Koeltl. “I accept full responsibility for my actions.”
Mashinsky agreed to plead guilty to two of the five counts against him, commodities fraud and a fraudulent scheme to manipulate the price of the Celsius token. The most serious charge carries as much as 20 years in prison.
Mashinsky admitted that he made statements in December 2021 in connection with the Celsius earn program that induced customers to exchange Bitcoin for CEL tokens and likely gave them “false comfort.”
“I gave an interview in which I suggested that Celsius had received approval from regulators even though that was not true,” said Mashinsky, who was also the company’s chief executive officer.
A former top Celsius executive, Roni Cohen-Pavon, pleaded guilty last year and agreed to cooperate with prosecutors against Mashinsky. By pleading guilty, Mashinsky avoids a trial that was set for late January and may be sentenced less harshly than if he had been convicted by a jury.
He will be sentenced on April 8. Under an agreement with prosectors, Mashinsky won’t appeal any sentence of 30 or fewer years.
Prosecutors charged Mashinsky in July 2023 with two related criminal schemes: lying to customers about Celsius and engaging in manipulative trades. They say he waged a yearslong scheme to mislead customers before Celsius collapsed in 2022 with more than $1 billion in debt.
Prosecutors claim Celsius spent hundreds of millions of dollars on the open market to inflate the price of the firm’s CEL token. Mashinsky allegedly picked Cohen-Pavon to oversee the firm’s frenzied CEL purchases, in some cases paying with its customers’ deposits without disclosing it.
“The issue is that people are selling and no one is buying except for us,” Cohen-Pavon allegedly told Mashinsky in a private message. “The main problem was that the value was fake and was based on us spending millions (~8M a week and even more until February 2020) just to keep it where it is.”
Celsius’ collapse in 2022 was followed about four months later by the implosion of Bankman-Fried’s FTX.
Prosecutors say Mashinsky made a series of misleadingly rosy statements about his platform’s financial health on a series of online videos dubbed “Ask Mashinsky Anything” even as the digital currency market was facing a serious downturn.
Mashinsky’s company gained popularity paying high interest rates on digital-asset deposits. But following the collapse of the TerraUSD stablecoin and a downturn in the digital-asset markets, the company was unable to meet an influx of customer withdrawals.
Bankman-Fried was convicted of orchestrating a fraud that allowed FTX customer money to be diverted into sister hedge fund Alameda Research. He was sentenced to 25 years in prison and is currently in a federal lockup in Brooklyn, New York.
The case is US v Mashinsky, 23-cr-00347, US District Court, Southern District of New York.
--With assistance from Ava Benny-Morrison and Chris Dolmetsch.
(Adds Mashinsky comments starting in fourth paragraph.)
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