The agreement comes several years after Attorney General James first initiated legal action against Mashinsky in 2023. According to the press release issued by the attorney general’s office, the original lawsuit accused the former tech executive of systematically misleading hundreds of thousands of retail investors—including more than 26,000 residents of New York State—regarding the fundamental safety, stability, and financial health of their cryptocurrency deposits held with Celsius.
Mashinsky’s legal troubles extend far beyond civil penalties imposed by state regulators. He is currently serving a 12-year federal prison sentence after pleading guilty to serious criminal charges of securities and commodities fraud. Furthermore, federal regulatory scrutiny has matched the criminal prosecution; in June, Mashinsky was permanently barred from any commodities activity by the Commodity Futures Trading Commission (CFTC) as part of a final resolution with the federal market regulator.
Under the terms of the newly announced New York settlement, the financial obligations imposed on Mashinsky are structured around specific contingencies related to his federal liabilities and imprisonment. Mashinsky is required to pay the state of New York $25 million in the event that he does not forfeit $10 million in ill-gotten gains directly to the federal government. Additionally, he faces an additional $10 million penalty if he fails to serve the entirety of his federal prison sentence, according to details provided by the attorney general’s office.
The downfall of Celsius Network stands as one of the most significant chapters in the broader crypto market downturn of 2022. The company, which had aggressively marketed itself as a high-yield alternative to traditional banking institutions, abruptly froze customer withdrawals in June 2022 amid mounting liquidity pressures. The sudden freeze cut off access to billions of dollars in digital assets for retail users worldwide. Just a month after slamming the brakes on customer accounts, Celsius officially filed for Chapter 11 bankruptcy protection, triggering a complex, multi-year winding down of its operations and prolonged legal battles in bankruptcy court.
Despite the devastating losses and prolonged uncertainty, recovery efforts have gradually returned funds to affected participants. As of August, Celsius customers and creditors have received more than $3.4 billion through the ongoing bankruptcy proceedings, according to the attorney general. These distributions follow a framework established when the company officially emerged from bankruptcy in 2024. At that time, Celsius had planned to distribute roughly $3 billion in a combination of cryptocurrency and cash to creditors, utilizing mainstream digital asset platforms like Coinbase and PayPal to facilitate the complex payment process to thousands of dispersed claimants.
Throughout the civil litigation and subsequent regulatory proceedings, state and federal authorities highlighted the stark contrast between Mashinsky’s public representations and the internal reality at Celsius. Attorney General James pointed out that Mashinsky actively promoted Celsius as an entity that was demonstrably safer than a traditional brick-and-mortar bank, assuring depositors that their funds were secure while the company was simultaneously deploying customer assets into high-risk investment strategies and actively concealing deep financial losses from the public.
In her statement announcing the settlement and industry ban, James emphasized the broader message that the enforcement action sends to bad actors operating within the digital asset ecosystem. Declaring that she will not allow dishonest operators to exploit novel financial technologies to target regular people, the attorney general reaffirmed her office’s commitment to holding executives accountable when they deceive consumers and misrepresent the risks associated with cryptocurrency investments.
