The failed Celsius project has been brought to justice, and Alex Mashinsky, CEO of the Celsius platform, has been sentenced to 100 years in prison by order of the U.S. Department of Justice.
Finally, the failed Celsius project has been held accountable, and Alex Mashinsky was arrested under the directive of the U.S. Department of Justice.
Celsius Network was introduced as a blockchain-based financial technology platform. It staunchly criticized traditional banking and presented itself as a provider of innovative financial and banking services. On this platform, users could obtain loans backed by their cryptocurrency assets and earn interest on their deposits.
Although everything initially seemed fine, the news of Celsius’s bankruptcy and the subsequent arrest of Its founder shocked the cryptocurrency community. Beyond this shock, the revelations and the truth behind the story are far more alarming.
Case Overview
There are seven clear charges against Alex Mashinsky and four significant charges against Roni Cohen Pavon, Celsius’ Chief Financial Officer, who is currently hiding in Israel. Each of these charges could lead to decades of imprisonment for both defendants.
These accusations, collected in a 46-page document, show that Mashinsky and Cohen siphoned millions of dollars from users’ assets through numerous lies throughout Celsius’ five years of operation. But that’s not all—charges have also been brought against Celsius and Mashinsky by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC). We will explore these accusations, or shocking crimes, in detail.
Celsius’s CEO and CFO are accused of orchestrating a multi-billion-dollar fraud and manipulating the price of Celsius tokens. According to the U.S. Department of Justice (DOJ), from 2018 to 2022, Celsius promoted its platform as the safest place to store cryptocurrency assets, but billions of dollars in user investments were ultimately lost.
In addition to its false advertising, Celsius offered a guaranteed profit system for user assets on the platform. The astronomical 18% interest rate, security promises, and many other assurances gradually turned Celsius into one of the world’s largest crypto companies. However, with its collapse, Celsius caused 250,000 victims to lose $25 billion.
Eight Big and Believable Lies!
Initially, everything appeared normal: a crypto project like many others that failed, with users who hadn’t done thorough research before investing ending up at a loss.
However, when the project suspiciously declared bankruptcy and users began filing complaints, the DOJ initiated investigations. The shocking findings revealed a massive fraud. Let’s examine these eight big lies to see if Celsius was a failed project or if something else was at play.
First Lie: In June 2022, Celsius froze users’ assets suspiciously and declared bankruptcy a month later.
Second Lie: Mashinsky, in the company’s annual report, accused his employees of lying and manipulating the company’s Twitter posts, deflecting some of the lies onto them. However, no corrections were made to these posts.
Third Lie: Mashinsky repeatedly claimed that all Celsius tokens (CEL) offered in the initial coin offering (ICO) in 2018 were sold for $50 million. In reality, only one-third of the tokens were sold for $32 million, with the remainder staying in Celsius’ treasury.
Fourth Lie: Celsius claimed to be profitable, with large profits deposited into users’ accounts weekly. The payouts were much higher than the project’s actual income, and Mashinsky knew the project wasn’t profitable in 2019 and 2020 but never stopped making false claims.
Fifth Lie: Mashinsky always insisted that loans issued by Celsius were either fully or partially collateralized and that no unsecured loans were given. In contrast, in 2021 alone, $1.8 billion in unsecured loans were issued, which accounted for 39% of Celsius’ institutional loan portfolio.
Sixth Lie: Mashinsky claimed Celsius’ operations were fully transparent and regulated, and in 2021, he said regulatory bodies were monitoring and confirming the platform’s compliance. In reality, Celsius was under intense scrutiny by regulators in the U.S. and other countries, with each violation being carefully tracked.
Seventh Lie: Celsius claimed it would never face a “bank run” crisis, as its lending services would never exceed its treasury’s capacity. This was a blatant lie, as Celsius had no assets other than those deposited by users, making a bank run possible at any moment.
Eighth Lie: One of Mashinsky’s most inhumane lies occurred just before freezing users’ assets in June 2021. He assured users not to withdraw their funds from Celsius, saying he kept millions of his assets on the platform. The reality was quite different: before freezing users’ assets, Mashinsky withdrew $5.1 million worth of CEL tokens from the platform and pocketed $42 million from selling CEL tokens.
Other Allegations in Alex Mashinsky’s Case
Lying to and deceiving users and encouraging them to buy and hold CEL tokens are not the only charges against Alex Mashinsky and Roni Cohen Pavon. Another crime they are accused of is manipulating the price of CEL tokens and encouraging users to buy during inflationary price hikes. While Mashinsky and Cohen Pavon urged people to buy CEL at prices higher than the token’s actual value, they were simultaneously selling off large amounts of their tokens.
In October 2021, Cohen Pavon sent Mashinsky a WhatsApp message stating, “The problem is that people are selling, and there are no buyers in the market except us. This week, we bought four million dollars worth of CEL, but the price is still falling.”
A misleading point here is that although Mashinsky bought 29,000 CEL tokens at around $4 each (valued at approximately $116,000) on November 5, 2021, and mentioned it in his annual report, in the 30 days prior, he had been selling 247,000 CEL tokens worth approximately $1,480,000 at around $6 each.
The highest recorded price for CEL tokens was around $7, but after Mashinsky’s massive sell-off, the cost of each token dropped from $6-$7 to below $1!
The Destructive Impact of This Crime on Users’ Lives
The loss of approximately 97% of the value of CEL users’ investments is a very bitter experience and, in some cases, irreparable. Individuals who invested a small portion or, in some cases, all of their life savings in the Celsius project due to this team’s false claims now have their hopes pinned solely on the final court ruling.
Research conducted on the impact of this crime on CEL holders’ lives by Simon Dixon, an investor and expert in Bitcoin and blockchain, is very troubling. Simon, who is also considered one of the primary victims in this case, reports witnessing a large number of suicides among CEL users—people who were forced to close their businesses and revert to lower-paying jobs after losing a significant portion of their life savings. Some have even changed their country of residence due to their inability to cover living expenses.
What do you think the punishment for such a crime should be? The answer to that question is obvious. Let’s take a closer look.
List of Criminal Charges and Their Sentences
The Nightmare Awaiting Mashinsky and Roni Cohen
Celsius faces various charges, and its crimes are not limited to fraud or theft; each category of these accusations constitutes separate criminal offenses that must be prosecuted individually. The classification of these charges is as follows:
Charge #1: Security Fraud
The U.S. Department of Justice is considering the highest possible sentence of 20 years in prison for the defendants based on the civil complaint filed by the U.S. Securities and Exchange Commission against Celsius customers.
Charge #2: Commodities Fraud
Since cryptocurrencies like Bitcoin are recognized as commodities by the U.S. Commodity Futures Trading Commission, any misuse of customer assets or price manipulation is deemed commodities fraud. Accordingly, the highest sentence for this offense will be ten years in prison.
Charge #3: Wire Fraud
Wire fraud involves using electronic communications to deceive individuals and steal their property. Mashinsky’s annual reports are considered a form of internet fraud, and a maximum sentence of 20 years in prison is imposed.
Charge #4: Conspiracy to Commit Security Fraud
Market manipulation and wire fraud are considered conspiracy to commit security fraud, which carries a separate five-year prison sentence.
Charge #5: Security Fraud
Conspiring to commit fraud by manipulating CEL token prices carries a maximum sentence of 20 years in prison.
Charge #6: Manipulation of CEL Token Prices
Manipulating the price of CEL tokens is viewed as a separate crime, and it carries a maximum sentence of 20 years in prison.
Charge #7: Wire Fraud
This wire fraud charge arises from manipulating market prices through electronic communications, which likewise carries a maximum sentence of 20 years in prison.
Based on this, Alex Mashinsky faces a sentence of 115 years in prison, while Roni Cohen Pavon is looking at 65 years. As mentioned earlier, these sentences are based on complaints from three major organizations, the SEC, CFTC, and FTC, against Mashinsky and Celsius.
This is not the first time such a heavy sentence has been imposed on individuals in the crypto space. Sam Bankman, the CEO of FTX, also received a 115-year sentence based on eight charges, and that criminal sentence is currently being executed.
The importance of such decisive actions goes beyond the project itself and addressing user complaints. The firmness with which governments approach these cases, directly and indirectly, enhances the ecosystem’s security. A space where opportunistic individuals are less likely to exploit will gradually increase the credibility of influential crypto projects. On the other hand, removing fraudulent projects will lead to an influx of capital toward the top projects in the market, providing a brighter future for genuine blockchains.
Governments’ blind prohibitions will harm their economies and cause them to fall behind in modern technologies. Therefore, the more awareness and knowledge in this field, the more all three parties—governments, developers, and the general public—will benefit.
A simple look at the approach of developed countries reveals that not only can the cryptocurrency and blockchain industry not be halted, but opposing or avoiding it will ultimately be detrimental to us.
