Founder of failed crypto lending platform Celsius Network should face 20 years behind bars, prosecutors argue

The founder and former CEO of the failed cryptocurrency lending platform Celsius Network should face 20 years behind bars for lying and self-dealing that cost customers billions of dollars in losses, prosecutors told a judge Tuesday.

Alexander Mashinsky, 59, told thousands of customers that their money was safe and secure, leading to investors pouring over $20 billion into Celsius by 2021, they wrote in a submission ahead of a scheduled May 8 sentencing in Manhattan federal court.

“They were not,” prosecutors said, noting that Celsius declared bankruptcy in 2022 and acknowledged that it could not return to customers what they had invested.

Prosecutors said Mashinsky fabricated Celsius' profitability and put customers' funds at the mercy of uncollateralized loans and undisclosed market bets. Meanwhile the company advertised itself as a modern-day bank where people could deposit crypto assets safely and earn interest.

“Mashinsky’s conduct made him rich,” they wrote.

In their own submission to the judge, defense lawyers said their client should face no more than a year and a day in prison after pleading guilty in December to federal fraud charges. In doing so he admitted to misleading customers between 2018 and 2022.

The defense blamed the collapse of Celsius on a “cataclysmic downturn” of cryptocurrency markets in May and June of 2022.

“His actions were never predatory, exploitative or venal. He never acted with the intent to hurt anyone. He never stole money or scurried away with anyone’s assets. And he has never been driven by greed, cruelty, or avarice,” the lawyers said.

They also noted that Mashinsky had a difficult early life in a small Ukrainian town in the former Soviet Union, which his family fled when he was 7. They moved to Israel, where Mashinsky served for three years in the Israeli Defense Forces as a fighter pilot.

“This case is not about an arrogant, greedy swindler who thought he could get away with stealing people’s hard-earned money to satisfy his own hedonistic pleasures. Nor is it about a sham company that was exposed as a house of cards when it went bankrupt. Those are posthoc, shallow and dehumanizing tropes that do not apply here,” the defense said.

The lawyers described Mashinsky as a devoted father to six children who deserves leniency in part because his crimes arose from “otherwise legitimate efforts that have crossed over into criminality as a result of unexpected difficulties.”

At his plea, Mashinsky admitted illegally manipulating the price of Celsius’ proprietary crypto token while secretly selling his own tokens at inflated prices to pocket about $48 million.

In court, he admitted that in 2021 he publicly suggested there was regulatory consent for the company’s moves because he knew that customers “would find false comfort” with that.

He said that in 2019, he was selling crypto tokens even though he told the public that he was not, knowing customers also would draw false comfort from that.

An indictment alleged that Mashinsky promoted Celsius through media interviews, his social media accounts and Celsius’ website, along with a weekly “Ask Mashinsky Anything” session broadcast that was posted to Celsius’ website and a YouTube channel.

This story was originally featured on Fortune.com