Alex Mashinsky has been living on borrowed time for months. In January, the founder and former CEO of bankrupt crypto lender Celsius was hit with a lawsuit by the New York Attorney General, alleging that he’d misled investors. Yesterday, Mashinsky was arrested and charged with seven counts of fraud by the US Department of Justice. If found guilty on all of the criminal counts, Mashinksy could face up to 115 years in prison. He pleaded not guilty and was released from custody on a $40 million bond.

Celsius’ collapse in June 2022 was part of a chain reaction—starting with the fall of the Terra Luna stablecoin in May 2022—that brought crypto to its knees, culminating in November in the bankruptcy of the crypto exchange FTX, whose founder, Sam Bankman-Fried, now faces 13 criminal charges.

The DOJ accuses Mashinsky of “orchestrating a scheme to defraud customers of Celsius through a series of false claims about the fundamental safety and security of the Celsius platform” and of conspiring with Roni Cohen-Pavon, chief revenue officer at Celsius, to inflate the price of the firm’s own-brand token, CEL. “The message we send today is quite simple: If you rip off ordinary investors to line your own pockets, we will hold you accountable,” said Damian Williams, US Attorney for the Southern District of New York. “Whether it’s old-school fraud or some new-school crypto scheme, it doesn’t matter one bit. It’s all fraud to us.”

The Securities and Exchange Commission, Commodities and Futures Exchange Commission, and Federal Trade Commission all simultaneously filed separate civil charges in Manhattan federal court on similar grounds. As part of a settlement with the FTC, Celsius has agreed to pay a $4.7 billion fine, but only after creditors have been reimbursed.

The law firm representing Mashinksy did not respond to a request for comment.

Mashinsky’s arrest will afford a moment of catharsis to Celsius creditors, whose money remains tied up in bankruptcy proceedings. But some in the industry fear the attitudes that created the conditions for the rapid growth and dramatic collapse of Celsius and FTX are still prevalent and that the industry remains vulnerable to influential individuals who are able to portray themselves as revolutionaries and pioneers.

“The crypto industry “has an enormous attack vector for intelligent sociopaths,” says Travis Kling, cofounder of hedge fund Ikigai Asset Management. “We haven’t been honest with ourselves about how bad that attack vector is and how damaging it’s been.”

Founded by Mashinsky in 2017, Celsius took in people’s crypto deposits, which it then invested or loaned out to fund interest payments to account holders and generate returns for itself. Customers were drawn in by promises of interest as high as 17 percent on deposits—tens of times greater than the rate offered by traditional banks at the time. At its peak, the company held custody of upwards of $25 billion in customer assets, the DOJ claims. At the peak of crypto fever in 2021, Celsius’ hours-long “Ask Mashinsky Anything” livestreams, in which the founder would preach weekly to his congregations of “Celsians,” would attract thousands of people.

However, the collapse of the Terra Luna stablecoin in May 2022 blew a billion-dollar hole in the Celsius balance sheet that, combined with a slump in the crypto market, left Celsius unable to meet a surge in customer withdrawals. On June 12, the company announced it would halt withdrawals, citing “extreme market conditions.” A month later, the company filed for Chapter 11 bankruptcy, trapping $4.7 billion of its customers’ money.

A similar pattern played out at other crypto lenders: BlockFi, Voyager Digital, and Genesis Global Capital have all since filed for bankruptcy, caught up variously in the failures of the Terra Luna stablecoin, hedge fund Three Arrows Capital and crypto exchange FTX.

“In the last 18 months, it has become very clear that centralized borrow-lend businesses are a huge problem. They ended up being the epicenter” of the collapse, says Kling—whose fund has substantial assets still locked in the FTX bankruptcy. “There was so much reckless lending.”

The public nature of the ledger on which crypto sits, says Kyla Curley, a forensic accountant and partner at advisory firm StoneTurn, means Celsius was bound to be caught out eventually. “If the data is telling a story, government agencies will take note and pursue,” she says.

In the year since Celsius declared bankruptcy, Mashinsky has been accused by creditors of lying about the nature of the service, and by an independent examiner commissioned by the bankruptcy court of operating a Ponzi scheme, whereby payouts to existing customers were funded in effect by others’ deposits.

In crypto circles, Mashinsky’s arrest was considered “long overdue,” added Cory Klippsten, CEO at trading platform Swan Bitcoin.

The DOJ complaint states that, while Mashinsky portrayed Celsius as a “modern day bank,” he instead operated the 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.”

The “litany of charges,” says Lisa Bragança, attorney at Bragança Law and ex-branch chief at the SEC, will be “devastating” for Mashinsky. “It’s a heck of a lot for the government to prove,” she says, “but it only has to prove pieces” to secure a significant jail sentence. It’s also likely that prosecutors have obtained testimony from Celsius insiders, explains Bragança—“and that’s big.”

At word of Mashinsky’s arrest, a number of Celsius creditors gathered in group channels on Telegram and elsewhere to celebrate: “Fuck yeah,” wrote one creditor. “I’d love to see a perp walk,” said another. But some were more reserved, pointing out that the arrest will do nothing to accelerate asset recoveries. “I wish there was a way to make this madness end sooner,” one channel member wrote.

Others have been left with an uncomfortable sense that crypto has not yet managed to clear its decks of bad actors and that, should another hype cycle arrive, the conditions that bred the likes of Celsius and FTX could recur. In short, that lessons have not necessarily been learned.

In particular, says Kling, the crypto industry remains vulnerable to hero worship—a tendency to venerate the individuals that accrue the most money and command the greatest influence in the sector: like Mashinsky, Bankman-Fried, Do Kwon of Terra Luna, and Kyle Davies and Su Zhu of Three Arrows.

The charges leveled at Celsius and FTX—of deceiving investors, commingling assets, and shuffling customer funds between subsidiaries—are echoed by those brought since March by the CFTC and SEC against Binance, the world’s largest crypto exchange, and its CEO Changpeng Zhao.

Zhao has dismissed the complaints as baseless, and members of his 8.5 million-strong Twitter following has rallied behind the exchange, but the allegations have left figures like Kling wondering whether the crypto sector is set for another fall.

“It’s been 13 years since Bitcoin [was created], and the space has not much to show for itself in terms of making the world a better place, when you net the good against the bad,” he says. “All crypto has is potential. Whether it fulfills that potential is dependent on the individuals, but there are a lot of people in crypto that don’t give a single solitary fuck about making the world a better place.”