Wednesday, October 5, 2022

Celsius dragged to court by former partner KeyFi over fraud allegations

Defi aggregator KeyFi has levied a series of allegations against embattled crypto lender Celsius, and has filed a lawsuit. According to a Friday announcement by Jason Stone, the co-founder and CEO of KeyFi, the two companies were former partners, with his firm responsible for managing a part of Celsius’ customer deposits.

Celsius defrauded us, says KeyFi Head

According to Stone, all was well in business before Celsius decided to defraud KeyFi as their business relationship turned sour. 

The CEO claims that at one point, his firm did create DeFi strategies for Celsius. And that by August 2020, was managing a new Ethereum address starting with 0xb1. Although the address was in the care of KeyFi, Celsius also shared the private keys to it. This was because the address was holding deposits from Celsius’ customers.

Stone also claims that his firm, KeyFi, was already managing no less than $2 billion worth of assets for Celsius. However, the partners fell out after KeyFi discovered that Celsius’ risk management team lied about hedging against market fluctuations. He wrote:

“But in late Feb 2021, we discovered Celsius had lied to us. They had not been hedging our activities, nor had they been hedging the fluctuations in cryptO asset prices. The entire company’s portfolio had naked exposure to the market.”

According to a legal filing, Celsius refused to acknowledge all of Stone’s work and would not pay for the services rendered in the course of their partnership. So, seeing as all attempts to resolve the matter amicably has proven abortive, Stone is now heading to court.

Interestingly, Celsius is yet to comment on any of the accusations levelled against it.

Celsius withdrawals still halted

Twenty-six days on, withdrawal activities and other transactions are yet to return to Celsius’ platform. Although, on Jun. 30, the firm said it is exploring strategic transactions and liability restructuring. That’s as much that has been said so far in that regard.

Meanwhile, various reports are suggesting that some companies like Goldman Sachs may be willing to buy out the company’s assets. But whatever might be the case, it is increasingly unclear whether clients will ever have access to their funds again.

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