Former Celsius CEO Alex Mashinsky Barred from Claiming Bankruptcy Payouts

Former Celsius CEO Alex Mashinsky has formally agreed not to pursue any share of the assets being distributed through the company’s ongoing bankruptcy process. A motion filed on Monday by the United States Bankruptcy Court for the Southern District of New York revealed that Celsius debtors and Mashinsky have reached a legal agreement to prevent any payouts to the former executive and his related parties.

The filing allows Celsius to distribute funds that were previously locked due to outstanding claims by Mashinsky and the three entities. The court retained jurisdiction to oversee any disputes related to the agreement but made clear it will not interfere with Mashinsky’s ongoing criminal case.

“The Court shall have exclusive jurisdiction to resolve any and all disputes related to this Stipulation and Order,” the motion stated, underscoring that the criminal proceedings remain separate and unaffected by this bankruptcy arrangement.

Mashinsky Sentenced to 12 Years in Prison for Fraud

The agreement follows Mashinsky’s sentencing in May, where he received 12 years in prison after being found guilty of fraud connected to the collapse of Celsius Network. His legal team had appealed for leniency by highlighting his past military service and his December guilty plea.

Despite these efforts, the court handed down a significant sentence, though it stopped short of the 20 years requested by the U.S. Department of Justice. Mashinsky’s lawyers argued that such a sentence would amount to a “death-in-prison” outcome given his age.

Mashinsky’s downfall has been a focal point in the broader scrutiny of failed crypto lenders, many of which collapsed during the 2022 market downturn.

Celsius Creditors Begin Recovering Funds

While Mashinsky is barred from recovery, creditors have begun seeing some relief. Since the start of 2024, creditors have claimed more than $1 billion in assets. In August 2024, the Celsius disbursed over $2.5 billion to more than 251,000 creditors.

However, around 121,000 potential claimants opted not to stake their claims—largely because the amounts were below $1,000, with many losing under $100. In a follow-up announcement from November, Celsius confirmed a $127 million payout from its “Litigation Recovery Account,” aimed at retail users and Earn program participants.

Celsius initially filed for Chapter 11 bankruptcy protection in July 2022, and two key settlements reached in 2023 have since helped the company advance toward completing its restructuring.