Alex Mashinsky made himself stand out as a unique person in the world of cryptocurrencies. Alex presented himself as a successful businessman even before the launch of Celsius Network, a site for lending digital currency.
Mashinsky called his clients “Celsians” and made it clear that he was on their side. He said that Celsius could stand up to the greed of standard banks and help people who aren’t as lucky. When he told them they could get returns of up to 18% with little risk, they put their faith in him.
In May 2022, when the cryptocurrency market was in chaos and causing the industry and the platform’s own token to fail, many Mashinsky users stuck with the company. “We all have our money in the same platform,” he told them. I have also put millions of dollars on the site. And it’s clear that we’re all in this together, right? We’ll get through this.”
But now, US officials say that it looks like all of Mashinsky’s claims were lies. Shortly after a 46-page indictment was made public, information about a man who, like other discredited crypto leaders, is said to have used investors’ trust to get rich.
Mashinsky told his followers to hold on, but he was quietly taking millions of dollars worth of cryptocurrency out of his Celsius accounts. The Department of Justice said that he knew the company, which he advertised as a modern bank but was really a risky investment fund, was about to fail. About two weeks later, Celsius stopped letting customers receive money, and by the middle of July, it had gone bankrupt, even though at its peak, it had around $25 billion in assets.
“Alex deserves everything he is getting,” said David Silver, an attorney who specializes in investment fraud and cryptocurrency litigation. “Because he was a good marketer, he took advantage of hundreds of thousands of people and stole their life savings.”
Mashinsky was taken into custody and put on trial for wire theft and other crimes. During a meeting in New York, he said he wasn’t guilty. Also, cases were brought against him by the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Federal Trade Commission.
The accusation shows that Celsius has been telling lies since the beginning. Mashinsky said that the company’s initial coin offering from five years ago brought in $50 million. The Department of Justice, on the other hand, says that only $32 million was raised and that more than a third of the tokens were not sold.
The government enforcement agencies also say that Mashinsky’s claims about how Celsius treated customer assets are not true. He said that Celsius didn’t bet on the direction of the market, but it’s been said that the company used customer coins to make dangerous bets on the future value of different cryptocurrencies, often at Mashinsky’s direction. Because of this, some of these bets led to customers losing a lot of money.
Mashinsky also said that all Celsius loans were either fully or partially secured. But the DOJ says that a big part of the portfolio was made up of loans without security.
Even though Mashinsky said Celsius was making money, internal papers from May 2022 showed that the company had lost about $800 million before taxes in 2021. The indictment also says that the company was still not making money in 2022.
In 2023, US regulators were busy bringing charges against the CEOs and leaders of the biggest cryptocurrency companies. The latest people to be punished are Celsius and Mashinsky.
Mashinsky’s personal history made him seem like a self-made underdog who rose to success through sheer drive. This made many people want to support him. His family moved from the Soviet Union to Israel when he was 7 years old. He has told stories about how the Russian border guard took away his only toy. After living in Israel for 16 years and learning economics for a short time, he went into the business of trading goods like sugar and fertilizer.
He moved to the United States about 30 years ago. Mashinsky says on his website that he invented VoIP (voice over internet protocol), but early leaders in the field have disproved this claim. Still, he was interested in the field because he started Arbinet, an online exchange where companies could trade network capacity. When Arbinet went public in 2004, the company was worth about $800 million, but Mashinsky was no longer CEO.
Mashinsky started Q-Wireless, which was one of the four companies that made up Transit Wireless. In 2007, Transit Wireless was given a contract to put wireless service in New York City subway stations.
In 2017, he helped start a company called Celsius. He raised money for it through an initial coin offering and turned it into a multibillion-dollar business.
Rayne Steinberg, the CEO of Arca, a company that specializes in digital assets, says that the cryptocurrency industry doesn’t have enough people with what seem to be legitimate backgrounds, successful company-building experiences, and significant successes in raising capital. Many people invested in Celsius because of Mashinsky’s marketing skills and what he was said to have done.
Mashinsky’s self-promotion is said to have helped him trick many people out of large amounts of money. His weekly video chats, called “ask-Mashinsky-anything,” became his brand. During these meetings, he talked about how great Celsius was, how well the company handled risks, and shared personal stories and philosophical ideas that connected with regular investors.
The indictment, on the other hand, shows that many of the almost 200 hour-long films were full of half-truths and outright lies. Employees of the company had to edit them often.
Since Celsius filed for bankruptcy, the court has gotten a lot of letters from people begging for help to get their life savings back. Many people talk about how Celsius’s acts have destroyed their lives. Some people thought about killing themselves after putting everything they had in the company.
Toby Lewis, CEO of crypto analytics company Novum Insights, who met Mashinsky at an industry event, said that he had a mysterious charm that made it easy for him to connect with people.
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