U.S. Attorney Damian Williams said: “Alexander Mashinsky orchestrated one of the biggest frauds in the crypto industry. He lured ordinary, retail crypto investors into investing billions of dollars in Celsius with false promises that their investments were low risk. Using catchy slogans like ‘Unbank Yourself,’ Mashinsky promised that Celsius would keep customers’ crypto as safe as money in a bank, but that, unlike a bank, Celsius returned most of the profits from its business back to users. In reality, Celsius was never profitable. To disguise the flaws in his business model, Mashinsky put investors’ money into riskier and riskier bets, and secretly used customer money to prop up the price of CEL token. Mashinsky made tens of millions of dollars selling his own CEL at artificially high prices, while his customers were left holding the bag when the company went bankrupt. These convictions reflect this Office’s commitment to holding fraudsters like Mashinsky accountable for their crimes.”
According to the allegations contained in the Indictment and statements made in public filings and in public court proceedings:
Celsius was a crypto asset platform that, among other things, allowed its customers to earn returns on their crypto assets in the form of weekly “rewards” payments, to take loans secured by their crypto assets, and to custody their crypto assets. Celsius billed itself as the “safest place for your crypto” and urged potential customers to “unbank” themselves by moving their crypto assets to Celsius. Celsius’s primary public offering was its “Earn” program, through which Celsius offered to deploy customers’ crypto assets to generate investment returns. In addition to its Earn program, Celsius offered retail investors a “Custody” program and a “Borrow” program, which allowed customers to receive retail loans in exchange for posting their crypto assets as collateral with Celsius.
MASHINSKY directly marketed Celsius to retail customers located in the U.S. and abroad. Throughout his tenure as CEO of Celsius, MASHINSKY repeatedly made public misrepresentations regarding core aspects of Celsius’s business and financial condition in order to induce retail customers to provide their crypto assets to Celsius and continue to use Celsius’s services. MASHINSKY misrepresented, among other things, the safety of Celsius’s yield-generating activities, Celsius’s profitability, the long-term sustainability of Celsius’s high rewards rates, and the risks associated with depositing crypto assets with Celsius.
As MASHINSKY falsely portrayed Celsius as a safe and secure institution, Celsius’s customer base grew exponentially. Many of those customers were retail investors rather than large institutions. By in or about the fall of 2021, Celsius had grown to become one of the largest crypto platforms in the world, purportedly holding approximately $25 billion in assets at its peak.
MASHINSKY and others working at Celsius also orchestrated a yearslong scheme to mislead customers and market participants regarding the market value and interest in Celsius’s proprietary crypto token CEL. They did so by manipulating the price of CEL through causing Celsius to spend hundreds of millions of dollars purchasing CEL in the open market with the objective of artificially supporting and inflating the price of CEL. At various times during MASHINSKY’s tenure, MASHINSKY and his co-conspirators also caused Celsius to use its own customer deposits to fund these market purchases of CEL in order to prop up CEL’s price, without disclosing this fact to Celsius’s customers.
Without Celsius’s aggressive and illegal price manipulation, the price of CEL would have been drastically lower. As Roni Cohen-Pavon, Celsius’s Chief Revenue Officer who previously pled guilty to illegally manipulating the price of CEL, wrote to MASHINSKY in a private message exchanged during the scheme: “[T]he issue is that people are selling [CEL] and no one is buying except for us,” adding, “[t]he 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.”
To further the scheme to manipulate CEL, MASHINSKY also repeatedly made false and misleading public statements concerning the nature of Celsius’s market activity and the extent to which Celsius itself was responsible for artificially supporting and inflating the price of CEL. In certain instances, MASHINSKY and other Celsius executives also personally purchased CEL for the purpose of artificially supporting CEL’s price.
Artificially inflating the price of CEL allowed MASHINSKY to sell his own CEL holdings for a substantial profit. MASHINSKY personally reaped approximately $48 million in proceeds from his sales of CEL. At various times, MASHINSKY made false and misleading public statements about his own sales of CEL, claiming that he was not selling CEL, when, in reality, he was taking advantage of the upward price manipulation he had orchestrated by contemporaneously selling huge quantities of his CEL on the market, including, on occasion, to Celsius itself.
In the lead up to the June 12, 2022 “Pause” of Celsius customer withdrawals, MASHINSKY continued to assure Celsius customers that Celsius was in a strong financial position and had sufficient liquidity to meet all customer withdrawal demands. Even as he made these statements, however, MASHINSKY had removed approximately $8 million worth of his own non-CEL crypto assets from the Celsius platform.
On June 12, 2022 Celsius announced it was halting all customer withdrawals from the Celsius platform, at which time hundreds of thousands of Celsius customers—many of whom were retail investors—still had approximately $4.7 billion worth of crypto assets on the Celsius platform, none of which they could access. On or about July 13, 2022, Celsius filed for Chapter 11 bankruptcy.
If you believe you have been a victim of the schemes described above, and you wish to provide information to law enforcement with connection to sentencing or to receive additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office of the Southern District of New York, at 866-874-8900 or wendy.olsen@usdoj.gov.
MASHINSKY, 58, of New York, New York, pled guilty to one count of commodities fraud and one count of securities fraud, which combined carry a maximum sentence of 30 years in prison.
The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. MASHINSKY is scheduled to be sentenced by Judge Koeltl on April 8, 2024.
Mr. Williams praised the outstanding work of the Federal Bureau of Investigation. Mr. Williams also thanked the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, each of which has filed a parallel civil action.
The case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Peter J. Davis, Adam S. Hobson, Allison Nichols, and Noah Solowiejczyk are in charge of the prosecution.
