Celsius, the bankrupt New Jersey-based cryptocurrency lending firm, has filed a counter-claim against decentralized DeFi aggregator KeyFi and its CEO Jason Stone. It is claimed that KeyFi lost millions of dollars worth of CEL through incompetence and fraud.
Celsius’ lawsuit follows KeyFi, which sued Celsius several weeks ago for allegedly breaching a profit-sharing agreement.
mismanagement and fraud?
Celsius claims KeyFi CEO Jason Stone misrepresented himself as a pioneer and expert in coin staking and decentralized finance. However, KeyFi has allegedly lost millions of dollars worth of coins from Celsius wallets due to mismanagement and fraud. Celsius also claims that KeyFi used these stolen coins to buy hundreds of NFTs and transferred them to its wallets. It also sold some of those assets for seven-figure returns, the lawsuit alleges.
Celsius also alleges in its lawsuit that Stone and KeyFi relied on cryptocurrency mixer Tornado Cash. Stone and KeyFi have laundered millions of dollars in Celsius property on several occasions with the same, it added.
Tornado Cash was recently blacklist by the US Treasury Department for its use in several money laundering cases.
Celsius has requested that KeyFi pay punitive damages for its criminal misconduct.
The lawsuit also alleges that Celsius and Stone agreed in August 2020 that Celsius would form a wholly owned subsidiary to acquire KeyFi assets and operate Celsius’s staking and DeFi operations, with Stone as the CEO of that subsidiary. When Celsius discovered that KeyFi had been using Celsius coins for other purposes, it asked Stone to return the coins.
In late March 2021, Stone responded that the KeyFi team would ensure the “full return of all KeyFi-managed Celsius tokens (principal + interest) by the end of April at the latest.”
KeyFi’s allegations against Celsius
KeyFi was only at the beginning of July sued Celsius for allegedly breaching a profit-sharing agreement and failing to pay KeyFi millions of dollars.
A MoU was signed by Arbitrarily and Celsius, which requires KeyFi to operate as Celsius KeyFi, a subsidiary of Celsius. Both groups worked together from August 2020 to March 2021.
Stone also claimed on Twitter that Celsius had taken out new loans at high interest rates to repay former depositors and creditors, which worked like a Ponzi scheme. He added that while Celsius said it would hedge any potential temporary loss from the joint operations into liquidity pools, it had not done so.
“The company’s entire portfolio has been openly exposed to the market.”
Endless fights
In July of this year, Celsius filed for Chapter 11 protection in the US, sending its 1.7 million users into a panic. Chapter 11 of the Bankruptcy Act generally provides for a reorganization, usually involving a corporation or partnership. A Chapter 11 debtor will typically propose a reorganization plan to keep their business afloat and pay creditors over time.
During the crypto crash in May Celsius was reported experienced a 50 percent drop in the value of their assets. In the same month, two leading digital tokens viz. Luna and TerraUSD collapsed. The Wall Street Journal soon reported analyst firm Nansen’s findings that Celsius was involved in the crisis despite a denial.
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