Alex Mashinsky: Celsius's Lying Machine

On the night of Sunday 12 June 2022, Celsius Network told its customers that it was pausing all withdrawals, swaps and transfers between accounts, citing "extreme market conditions". About 1.7 million people woke up to find their savings locked inside a crypto lender that had spent five years telling them their money was safe. A month later Celsius filed for bankruptcy. Its own papers showed $5.5 billion of liabilities against $4.3 billion of assets, and more than $4.7 billion owed to the customers who had trusted it.

The man who built it, Alex Mashinsky, is now serving 12 years in a United States federal prison. In October 2026 New York banned him for life from its securities, commodities and crypto industries.

The pitch

Mashinsky, now in his late fifties, was born in the Soviet Union. He told the court at his sentencing that his family left a small Ukrainian town for Israel when he was seven, that he served in the Israeli military, and that he later moved to America. He built a career as a telecoms entrepreneur and liked to describe himself as one of the inventors of internet phone calls, a claim others in that industry dispute.

He founded Celsius in 2017. Its slogan was "unbank yourself". Customers deposited cryptocurrency such as bitcoin and ether and were paid interest on it, at rates that reached well into double digits on some coins, far above anything a savings account offered. Celsius said it earned the money to pay them by lending the coins to institutions. In practice it worked like a bank without a bank's capital rules or deposit insurance: if the loans and bets went bad, there was nothing behind the customer's balance.

Mashinsky was the brand. He hosted weekly "Ask Mashinsky Anything" video sessions and told customers again and again that their money was safe. At its peak in 2021 Celsius held about $25 billion of customer assets, CNBC reported. Celsius also had its own token, CEL, a digital coin that worked something like a loyalty point crossed with a company share, and which Celsius bought in the market to keep its price up.

What was behind the curtain

Federal prosecutors in Manhattan said the safety was an illusion. When Mashinsky pleaded guilty in December 2024, he admitted misleading customers between 2018 and 2022 by promising their deposits were safe while he made up claims about Celsius's profitability and exposed their money to loans with no collateral and to risky trading bets that were never disclosed, the Associated Press reported.

The second count was about CEL. Prosecutors said Celsius spent customer money propping up the token's price while Mashinsky sold his own CEL at those inflated prices. Judge John Koeltl said at sentencing that the crimes had let him pocket more than $45 million while some customers lost everything.

The run came in May 2022, when the collapse of the TerraUSD stablecoin and its sister token LUNA shook confidence across crypto lending. Celsius customers began pulling money out. In May, before the freeze, Mashinsky withdrew about $10 million of his own, the Financial Times reported; his side said the withdrawal had been planned in advance and was mostly to pay taxes. On 12 June the doors shut. Celsius filed for Chapter 11 bankruptcy protection on 13 July 2022, and Mashinsky resigned as chief executive that September.

Arrest, plea and prison

On 13 July 2023, exactly a year after the bankruptcy filing, the FBI arrested Mashinsky in New York. Prosecutors charged him with securities, commodities and wire fraud, conspiracy and market manipulation. The same day the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Trade Commission all sued him. Roni Cohen-Pavon, Celsius's former chief revenue officer, pleaded guilty and agreed to cooperate.

Mashinsky pleaded not guilty, then changed his plea on 3 December 2024, a few weeks before his trial was due to start. He admitted one count of commodities fraud and one count of securities fraud. On 8 May 2025 Judge Koeltl sentenced him to 12 years in prison, three years of supervised release and forfeiture of $48.4 million. Prosecutors had asked for 20 years; his lawyers had asked for one year and a day. "He preyed on hope," Assistant US Attorney Allison Nichols told the court. Mashinsky wept as he apologised. A member of a victims' committee, Cameron Crewes, told the court that nearly 250 victims had died before seeing justice or compensation.

Where the money went

The bankruptcy court approved a repayment plan in November 2023, and Celsius came out of bankruptcy on 31 January 2024. It began handing more than $3 billion in crypto back to creditors through PayPal and Coinbase. Its bitcoin mining business became a new company, Ionic Digital, owned by the creditors. Most customers with interest-earning accounts got back only part of what they were owed.

The recovery work goes on. The estate's litigation administrator, a group formed by GXD Labs and the fund manager VanEck, sued companies that dealt with Celsius before the collapse. Tether, the issuer of the largest stablecoin, agreed to pay $299.5 million to settle claims over bitcoin it had taken as collateral and sold. In January 2026 Celsius announced a fourth distribution of $344.4 million to creditors, about $257 million of it from the Tether settlement.

Still fighting

The cases kept closing around him in 2026. In May, Judge Koeltl sentenced Cohen-Pavon to time served, after prosecutors said his help had been substantial. The same month Mashinsky, representing himself, asked the court to throw out his sentence, arguing that his former lawyers at Mukasey & Young had a conflict of interest and that the evidence against him was tainted. Prosecutors replied in August that the petition was "without merit" and should be denied without a hearing. No ruling had been reported by mid-October 2026.

In June 2026 he settled the CFTC's case by accepting a permanent ban from trading and from registering with the agency. The SEC said in July that it was in settlement talks with him.

On 9 October 2026 New York's attorney general, Letitia James, settled the civil fraud lawsuit her office had filed in January 2023 under the Martin Act, the state's securities fraud law. The suit said he had misled hundreds of thousands of investors, more than 26,000 of them in New York, about how safe Celsius was. Under the deal he is banned for life from the securities, commodities and crypto industries in New York, the equivalent of a stockbroker being struck off. The money is conditional. He must pay the state $25 million if he fails to hand a further $10 million of fraud proceeds to the federal government, on top of what he has already forfeited, and another $10 million if he does not serve his full 12-year sentence. The most he could owe New York is $35 million. "Alex Mashinsky promised New Yorkers that his company was a secure place to invest their hard-earned savings, only to leave them penniless when his risky investments collapsed," James said.