The founder of cryptocurrency lender Celsius Network was sentenced to 12 years in prison on Thursday.
Alex Mashinsky, the company’s former CEO, pleaded guilty to securities fraud and commodities fraud in December.
Federal prosecutors said Mashinsky artificially boosted the value of Celsius’ Cel token and profited more than $48 million as a result. Prosecutors led by U.S. Attorney Jay Clayton also said Mashinsky misled customers about Celsius’ safety.
“The case for tokenization and the use of digital assets is strong but it is not a license to deceive,” Clayton, who is based in Manhattan, said in a statement. The sentence includes three years of supervised release and forfeiture of the $48.4 million he made while leading the company.
The prosecution had sought a sentence of at least 20 years for Mashinsky, 59, saying it would be “just punishment” for the billions of dollars in losses he caused for thousands of people. The founder pushed for a one year and one day term, saying he was remorseful.
The Hoboken, New Jersey-based Celsius had offered customers as much as 17% interest on some deposits, but as crypto prices plummeted in the summer of 2022, customers rushed to withdraw their cash. Celsius had a $1.19 billion balance sheet deficit when it sought Chapter 11 bankruptcy protection in July of that year.
The 12-year sentence is one of the longest to arise from the 2022 crypto market meltdown that stemmed from the collapse of the crypto exchange FTX. That company’s founder, Sam Bankman-Fried, is serving a 25-year sentence for fraud. He’s currently appealing his conviction.
In addition to the criminal trial, Mashinsky has had civil lawsuits filed against him by the Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Trade Commission, and New York Attorney General Letitia James.