A US federal judge in the Southern District of New York has sentenced Alex Mashinsky, founder of defunct cryptocurrency lending platform Celsius, to 12 years in prison.

On Thursday, at the end of a lengthy court hearing in Manhattan, Judge John Koeltl handed down the sentence.

Beforehand, the court heard from multiple former Celsius customers who testified to the damage Mashinsky’s actions had wrought on their lives. Mashinsky reportedly shed tears as he delivered his own prepared remarks, asking for forgiveness and issuing an apology.

In July 2023, the US Department of Justice charged Mashinsky with seven counts of fraud. Though he initially denied the charges, Mashinsky later pleaded guilty to two counts: commodities fraud and securities fraud.

As part of the plea deal, Mashinsky admitted to lying to Celsius customers about fundamental aspects of the business—including how their funds would be invested—and manipulating the price of a proprietary crypto coin for his personal financial benefit. He also agreed to forfeit $48 million to the DOJ.

“Alexander Mashinsky orchestrated one of the biggest frauds in the crypto industry,” said US Attorney Damian Williams in a statement at the time of the guilty plea. “Today’s convictions reflect this Office’s commitment to holding fraudsters like Mashinsky accountable for their crimes.”

Founded in 2017, Celsius marketed itself as a new-age alternative to traditional banks, which Mashinsky painted as unsafe, untrustworthy, and avaricious. At a conference in 2021, the Celsius founder appeared onstage wearing a plain T-shirt emblazoned with a slogan: “Banks are not your friends.”

During a period in which banks were offering almost no interest on savings, Celsius lured in customers with the promise of rates as high as 18 percent on crypto deposits. The company funded those interest payments by either investing or loaning out the crypto in its custody. By 2021, Celsius held upwards of $25 billion in customer assets, the DOJ claims.

Meanwhile, Mashinsky began to attract a devoted following. In hours-long Ask Mashinsky Anything livestreams, the Celsius founder preached to thousands of his congregation of “Celsians.”

However, in May 2022, things went south. The collapse of the Terra stablecoin and its sister token Luna simultaneously blew an almost billion-dollar hole in the Celsius balance sheet and, as crypto prices nosedived, sent panicked customers rushing to withdraw billions of dollars’ worth of crypto from their accounts. After its Terra and Luna investments and loans extended to other companies affected by the downturn went sour, court filings indicate, Celsius no longer had the necessary funds to pay up and was eventually forced to suspend withdrawals.

In July of that year, Celsius filed for bankruptcy, trapping more than $4.7 billion of its customers’ funds. (Through the bankruptcy proceeding, customers have since recovered roughly 60 percent of the funds they lost, but only partially in cash form.)

When Mashinsky was arrested, prosecutors accused him of misleading Celsius customers about the nature of the business. Though Mashinsky portrayed Celsius as a “modern-day bank,” the original indictment stated, he operated the company as “a risky investment fund, taking in customer money under false and misleading pretenses and turning customers into unwitting investors in a business far riskier and far less profitable than what Mashinsky had represented.”

Under the applicable sentencing guidelines, Mashinsky could have faced up to 30 years in prison. But federal judges are required to take into account various additional factors when arriving at a sentence, including the characteristics and personal history of a defendant, the likelihood they might reoffend, and so on.

“It’s a complicated patchwork of facts to put together to come to a just sentence,” says Timothy Howard, partner at law firm Freshfields and former Southern District of New York prosecutor.

In advance of the sentencing hearing, Mashinsky’s legal representatives had petitioned the judge for a custodial sentence of only 366 days, citing his admissions of guilt, his military service in Israel, the deprivations he experienced in childhood, and external market factors that contributed to the downfall of Celsius.

“This case is not about an arrogant, greedy swindler who thought he could get away with stealing people’s hard-earned money to satisfy his own hedonistic pleasures,” argued Mashinsky’s lawyers in a court filing. “Those are post-hoc, shallow and dehumanizing tropes that do not apply here.”

The DOJ, meanwhile, asked the judge to impose a 20-year prison sentence. Despite pleading guilty and conceding to certain lies, Mashinsky had demonstrated no contrition for his wrongdoings, prosecutors claimed. Neither had he defrauded his customers unwittingly, they argued.

“His crimes were not the product of negligence, naivete, or bad luck. They were the result of deliberate, calculated decisions to lie, deceive, and steal in pursuit of personal fortune,” prosecutors wrote in their filing. “He has abandoned all pretense of acknowledging his sustained wrongdoing … This profound lack of remorse underscores the continuing danger he poses.”

The yawning gap between the sentences requested by the defense and prosecution reflects the dispute between the two sides over the nature of Mashinsky’s wrongdoing: namely, whether the Celsius founder was guilty of a handful of ill-considered lies—those to which he had already admitted—or a concerted and extensive campaign of fraud.

“Where there has been a plea, to the extent that there are factual disputes, they are often relatively minor, and the core of the conduct is clear,” says Katherine Reilly, a partner at law firm Pryor Cashman who previously led the complex frauds and cybercrime unit in the SDNY. “But here, the defense has really tried to stake out ground that the offense is narrower than the government is alleging.”

In asking for only a yearlong prison sentence and conceding to only very limited wrongdoing, Mashinsky and his counsel were “walking on a tightrope,” says Howard. “It’s a strategic decision that defense counsel has to make. You need to balance advocating for your client with the lowest sentence possible while also maintaining some credibility with the judge,” he says.

In its submissions, the government drew direct comparisons between Mashinsky and various other convicted fraudsters, among them Sam Bankman-Fried, who was sentenced last year to 25 years in prison for his role in the elaborate fraud that resulted in the collapse of his crypto exchange, FTX. In their filing, Mashinsky’s lawyers tried to create as great a distance as possible between their client and Bankman-Fried. “While there may be some superficial similarities, these two crypto cases and their respective defendants are nothing alike,” they asserted. The crucial difference, the defense argued, is that Mashinsky has not been accused of embezzlement or the theft of customer funds.

“That discrepancy gets at the factual disputes laid out in the submissions,” says Reilly. “Was this a couple of errors in judgment in an effort to try to right the ship? Or was it really a fraudulent platform full of self-dealing?”

Ultimately, the judge proved unsympathetic to Mashinsky’s version of events, ruling that the severity of his crimes and the extent of the damage he caused to victims warranted a substantial prison sentence.

Having received his sentence, Mashinsky will be released temporarily while the Bureau of Prisons selects a suitable facility. Typically, white collar defendants like Mashinsky are housed with other nonviolent offenders, legal experts say.

In the federal system, there is no possibility of parole. Once the clock begins to tick on Mashinsky’s time in prison, the best he can hope for is early release on good behavior grounds, but typically only after 85 percent of his sentence has been served.

In targeting a much-reduced sentence, Mashinsky was dicing with a “risky strategy,” says Howard, creating an opportunity for prosecutors to demonstrate that he had grossly minimized his conduct. “That really shoots a hole in the ship.”