In a lawsuit filed in New York, struggling cryptocurrency lender Celsius has been charged with fraud, improper management of customers’ deposits, and breach of contract by staking software provider KeyFi.
Celsius is accused of running a Ponzi scheme in a lawsuit.
KeyFi founder Jason Stone claimed that Celsius ran a Ponzi scheme and used customer funds to manipulate the price of its cryptocurrency token CEL. The lawsuit asserts that the platform was a Ponzi because Celsius was unable to meet its withdrawal obligations.
“Celtic was forced to purchase ether on the open market at historically high prices, suffering significant losses, as customers tried to withdraw their ether deposits. Due to a shortage of cash, Celsius started to offer double-digit interest rates to entice new depositors, whose money was then used to pay off previous depositors and creditors.
The CEO of KeyFi stated that the Oxb1 address was created in August 2020 to allow Celsius to send customer deposits for KeyFi to manage and invest in during a lengthy Twitter thread by the decentralized finance (DeFi) account 0xb1, where Stone revealed his identity.
Stone claimed that KeyFi managed almost $2 billion in assets before the two parties parted ways, with the asset under management (AUM) value rising to over $800 million by April 2021. It’s interesting to note that the court document stated KeyFi and Celsius collaborated “without any formal written agreement.”
Celsius assured KeyFi that the risk management team overseeing the latter’s investment activities was “hedging any potential impermanent loss from our activities in liquidity pools” while managing the customers’ money.
But according to Stone, the team found out that Celsius broke their word later, in February 2021. The CEO of KeyFi claims:
“We found that Celsius had misled us. Both our activities and price fluctuations in cryptoassets had not been hedged by them. The company’s entire portfolio was open to the market.
Celsius settles the final MakerDAO debt
KeyFi cut ties with the cryptocurrency lending platform Celsius due to what it perceived to be questionable business practices. The KeyFi founder also mentioned that Celsius experienced a temporary loss (IL) after the company sold its DeFi positions, and he later attributed the IL to Stone.
In addition, Stone claimed that Celsius owes KeyFi a sizeable sum of money but did not specify how much. The CEO of KeyFi claimed that after failing to reach a quiet settlement with Celsius for more than a year, he filed the lawsuit. The thread says in part:
“I believe it is only prudent to finally clarify the record given the public speculating regarding the company’s solvency and my observation of Celsius’ shaky relationship with the truth. To finally resolve this matter, I filed a lawsuit against Celsius.”
Despite the fact that Celsius has not released any official statements regarding the lawsuit, the most recent development comes almost a month after the lending company stopped accepting withdrawals.
Later, Celsius hired restructuring attorneys to assist in resolving its financial crisis. According to a recent report by CryptoPotato, MakerDAO released 21,962 wrapped bitcoins (WBT) worth $448 million after the Celsius network paid the last $41.2 million of its debt to it.
