Celsius Founder Alex Mashinsky Files to Have 12-Year Crypto Fraud Sentence Vacated

Alex Mashinsky, the founder and former CEO of defunct crypto lending platform Celsius, is seeking to vacate his 12-year prison sentence according to a new motion filed in the District Court for the Southern District of New York.

The motion to vacate, which is handwritten by Mashinsky, cited ineffective counsel and “fruit of a poisonous tree” as grounds for vacating the sentence.

Mashinsky, who pleaded guilty to counts of commodities and securities fraud, attached additional materials to support his claims, noting that his ineffective counsel was in part due to “financial duress resulting in unavoidable and absolute conflict of interest with client.” 

“The root of counsel’s deficiencies lay in the undisclosed financial distress of the firm Mukasey & Young LLP,” Mashinsky’s motion for habeas corpus relief says. “This distress created a conflict of interest that permeated every strategic decision made by counsel since the outset of the petitioner’s representation.”

That conflict was the firm’s engagement with FTX founder and former CEO Sam Bankman-Fried, better known as SBF. Mashinsky said it created an “unwaivable conflict since it was market manipulation of the CEL token and StETH by SBF” that caused harm to Celsius, which later paused withdrawals, leaving customers without access to billions in deposits. 

Shortly after Celsius paused withdrawals, it was forced to file for bankruptcy in an attempt to stabilize its business. A year after the chaos surrounding his firm, Mashinsky was arrested and hit with a stack of charges from the SEC, CFTC, and FTC, some of which alleged he defrauded customers for $42 million. 

He later pleaded guilty, reportedly saying in court, “I know what I did was wrong, and I want to try to do whatever I can to make it right.”

Though some creditors wanted even harsher punishments, Mashinsky was sentenced to 12 years in prison for his crimes. Now he wants to see that sentence vacated. 

Last month, Mashinsky was formally banned from the cryptocurrency industry as part of a $10 million settlement with the FTC. The regulator initially earned a $4.7 billion judgement against him, though the bulk of the judgement has been suspended, requiring only the $10 million payment.