Alex Mashinsky, the former CEO of Celsius, has agreed to a settlement with the New York Attorney General’s office that imposes a lifetime ban on his involvement in the cryptocurrency, securities, and commodities sectors, alongside conditional payments that could total up to $35 million.
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New York Attorney General Letitia James announced the settlement on October 9, finalizing her civil lawsuit against Mashinsky for misrepresenting Celsius as a secure platform for cryptocurrency deposits. The lawsuit involved hundreds of thousands of investors, among whom more than 26,000 reside in New York.
Settlement Conditions Regarding Payments and Prison Terms
The agreement, as outlined by the attorney general’s office, specifies Mashinsky’s financial responsibilities. He must pay New York City $25 million unless he forfeits $10 million from ill-gotten gains to the federal government. The forfeiture required is distinct from the assets previously surrendered as part of the criminal case.
Moreover, if Mashinsky does not complete his full prison term, he is liable to pay an additional $10 million to the city. His sentence, handed down by a criminal court, is under the supervision of the Bureau of Prisons.
In a parallel federal case, he was sentenced to 12 years and ordered to forfeit over $48 million. This outcome followed his guilty plea in December 2024 concerning securities fraud and commodity fraud.
“Alex Mashinsky promised New Yorkers that his company would be a safe place to invest their hard-earned savings, only to leave them penniless when his risky investments failed,” James stated.
The lawsuit also addressed violations related to Mashinsky’s failure to register as a salesperson or dealer in securities or commodities for Celsius, as mandated by New York legislation.
Misleading Claims Regarding Celsius’ Investment Safety
The attorney general’s investigation uncovered that Mashinsky significantly misrepresented Celsius’ investment strategies, user base, and security. He advertised the platform as more secure than traditional banks, despite Celsius lacking the stringent regulations that govern banking institutions.
Mashinsky was found to have promoted Celsius in various public forums, social media, and interviews, asserting that the company engaged in low-risk investments and lent only to trustworthy borrowers. However, investigators revealed that he concealed substantial losses of hundreds of millions of dollars while utilizing client assets for risky investment approaches.
One case involved a New York investor who mortgaged two properties to deposit money into Celsius, and another investor lost $36,000 accumulated over nearly a decade due to the platform’s collapse.
Federal regulators have similarly scrutinized the legitimacy of Celsius’ revenue generation. As reported by crypto.news on June 19, the Commodity Futures Trading Commission (CFTC) accused Celsius of pooling customer cryptocurrencies for its investment funds and making weekly interest payments.
The allegations state that Celsius increasingly relied on unsecured loans and precarious decentralized finance transactions while assuring customers regarding the safety of their assets. The company reportedly attracted approximately $20 billion during the lawsuit’s timeframe.
Celsius ceased customer withdrawals in June 2022 and filed for bankruptcy shortly thereafter, leading to over $3.4 billion distributed to creditors through bankruptcy proceedings, as per the Federal Trade Commission (FTC).
Regulatory Actions and Future Limitations on Mashinsky
Earlier in April, Mashinsky also settled with the FTC, which included a permanent ban on his participation in advertising or providing wealth management services. This agreement followed an FTC order that targeted services allowing customers to invest, deposit, or withdraw assets. The settlement included a judgment of $4.72 billion, contingent on his financial disclosures.
The FTC agreement necessitates a $10 million payment, which could be met through qualifying payments to the Department of Justice as part of a criminal forfeiture. The FTC retains the right to reactivate previously suspended judgments if it finds Mashinsky engaged in misrepresentation of asset values or relevant financial disclosures.
Furthermore, by June 2023, a federal consent order permanently barred Mashinsky from trading in CFTC-regulated markets and prohibited him from registering with the CFTC, according to reports dated June 19.
Other co-founders of Celsius have also reached settlements with the FTC. In July, Shlomi Daniel Leung and Hanok “Nuke” Goldstein agreed to collectively pay $6.5 million, raising the total settlement amount for the three co-founders to $16.5 million.
A July FTC announcement detailed that Leung would pay $4.1 million while Goldstein would pay $2.4 million. These settlements also impose restrictions on future property-related business and prevent misrepresentations about services or products.
The FTC alleged that Celsius falsely assured customers of unhindered access to their deposits, maintained sufficient reserves, and provided a $750 million insurance policy for customers’ funds. The agency remarked that assurance persisted until the company declared bankruptcy.
Progress on Legal Proceedings and Future Requirements
In a separate civil case brought by the SEC, U.S. District Judge Paul Engelmayer issued an order dismissing the case without prejudice on September 29 after both parties indicated a settlement was reached in principle.
This order allows 90 days for either party to seek reinstatement should the settlement not finalize. To ensure enforcement of the agreement, Judge Engelmayer mandated that it be filed and entered into public record within the same timeframe.
Additionally, since May, Mashinsky has been participating in a legal effort to vacate his conviction and sentence, which has faced opposition from federal prosecutors, who labeled his claims as “without merit” in August.
The ruling issued on September 29 by U.S. District Judge John Koeltl dismissed several discovery requests without prejudice, aligning with the previous case dismissal decisions. A deadline of December 11 has been set for Mashinsky to respond to the government’s objections, with possible extensions allowed.
