By Luc Cohen

NEW YORK (Reuters) -Alex Mashinsky, founder and former CEO of cryptocurrency lender Celsius Network, pleaded guilty on Tuesday to two counts of fraud.

Mashinsky, 59, was indicted on July 13, 2023, on seven counts of fraud, conspiracy and market manipulation charges. Federal prosecutors in Manhattan said he misled customers of Celsius to persuade them to invest, and artificially inflated the value of his company's proprietary crypto token. He pleaded not guilty that day.

On Tuesday, during a hearing before U.S. District Judge John Koeltl, Mashinsky said he pleaded guilty to two out of the seven counts he was initially charged with: commodities fraud, and a fraudulent scheme to manipulate the price of CEL, Celsius’ in-house token.

In court, Mashinsky admitted to giving Celsius customers "false comfort" by giving an interview in 2021 in which he said Celsius had received approval from regulators for its "Earn" program, which it had not. That program offered to deploy customers' cryptocurrency assets to yield investment returns.

He said he also failed to disclose that he had been selling his holdings of CEL, the platform's in-house token.

"I know what I did was wrong, and I want to try to do whatever I can to make it right," Mashinsky said.

As part of his plea deal with prosecutors, Mashinsky agreed not to appeal any sentence of 30 years or less - the maximum he faces for the two counts. Koeltl is set to sentence him on April 8, 2025.

Federal prosecutors in Manhattan have said Mashinsky also personally reaped approximately $42 million in proceeds from selling his holdings of the Cel token.

"Mashinsky made tens of millions of dollars selling his own CEL at artificially high prices, while his customers were left holding the bag when the company went bankrupt," Damian Williams, the U.S. Attorney in Manhattan, said in a statement on Tuesday.

Before pleading guilty, Mashinsky had been scheduled to go on trial on Jan. 28.

"Sometimes, accepting responsibility when and where appropriate is the best way to help everybody move on," Mashinsky's defense lawyer Marc Mukasey told reporters after the hearing on Tuesday.

Founded in 2017, Celsius filed for Chapter 11 bankruptcy protection in July 2022 after customers rushed to withdraw deposits as crypto prices fell. Many were initially unable to access their funds. The company exited bankruptcy on Jan. 31, and has pivoted to Bitcoin mining.

Crypto lenders such as Celsius grew rapidly as crypto prices surged during the COVID pandemic. They promised easy loan access and eye-popping interest rates to depositors, then lent out tokens to institutional investors, hoping to profit from the difference.