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Crypto Celsius

Why Celsius Filed A Counter Lawsuit Against KeyFi For “Stealing Millions”

Reynaldo Marquez
by Reynaldo Marquez
2 years ago
·
Posted in Crypto News
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

According to a document filed with the Southern District of New York, crypto lending firm Celsius Network and Celsius KeyFi introduced a lawsuit against trading firm KeyFi and Jason Stone. The crypto lending firm claims Stone and his company were “incompetent” and “deceitful” during their partnership.

Related Reading: Celsius Network Investment Results In $150M Loss For Canadian Fund Giant

In the complaint, Celsius Network asked for the return of alleged stolen property and for the payment of supposed damages caused by Stone and KeyFi. The latter parties previously filed a lawsuit against their former partner.

As Bitcoinist reported two months ago, Stone accused Celsius and its CEO Alex Mashinsky of defaulting on contract obligations and operating a “Ponzi scheme”. The crypto lending company recently filed for bankruptcy in the state of New York and has been in the spotlight for failing to meet financial obligations.

According to Stone, Mashinsky hired him to trade with funds obtained from their clients and generate profits to pay the high yield offered on its platform. Stone and Celsius created a company called Celsius KeyFi to conduct their operations which were managed under the famous Ethereum address Oxb1.

At some point, Celsius KeyFi handled over $2 billion from the crypto lending platform clients. This happened without the users’ knowledge or consent. Stone allegedly stuck to this agreement until late 2021 when they allegedly discovered that Celsius failed to implement risk management strategies to mitigate potential risk.

In the document filed by the Mashinsky-led company, the story changes. The company accuses Stone of allegedly misrepresenting his skills and of running an unprofitable trading strategy that led to the “lost of thousands of Celsius coins through their gross mismanagement”. The complaint claims:

the Defendants (Jason Stone) stole millions of dollars in coins from Celsius “wallets” – blockchain addresses where coins and other digital assets can be stored – by transferring them to wallets that, upon information and belief, are controlled by the Defendants. In addition, without any notice to or authorization from Celsius, the Defendants began to use Celsius coins to buy hundreds of non-fungible tokens (“NFTs”), and then stole the NFTs they acquired with Celsius’ coins by sending them to wallets that, upon information and belief, they own or control.

Celsius CEL CELUSDT
CEL’s price trends to the downside on the 4-hour chart. Source: CELUSDT Tradingview

KeyFi Replies To Celsius Network’s Lawsuit

Furthermore, the document claims Stone and his company allegedly use Tornado Cash, the Ethereum-based decentralized exchange recently sanctioned by the U.S. Treasury, to launder the funds. Due to the nature of Tornado Cash, it’s hard to check the validity of these statements.

However, journalist Amy Castor believes Celsius might be trying to discredit Stone and the affirmations on his lawsuit. Castor said via Twitter:

Celsius is trying hard here to discredit Stone’s earlier lawsuit, claiming Stone was looking to score a “public relations victory” and his story was just “fantasy.”

Related Reading: Why This U.S. Congressman Condemned Tornado Cash Sanctions

A legal representative for KeyFi responded to the counter-lawsuit and the claims made by Celsius saying that it is an attempt to “rewrite history”. The legal representative said that the crypto lending firm is allegedly using Stone and KeyFi as “a scapegoat for their organizational incompetence”.

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Reynaldo Marquez

Reynaldo Marquez

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As an editor at NewsBTC, Reynaldo is an experienced journalist passionate about all things crypto. Reynaldo has interviewed key industry leaders, and created unique pieces analyzing the promise of crypto as the next frontier for an economic and social transformation of humanity. Since 2018, he has been at the forefront of the industry, closely following every major development and analyzing critical events at the heart of the crypto industry. With a keen eye for detail and an unwavering commitment to excellence, Reynaldo has been instrumental in bringing the latest news and insights to the crypto community. Outside of work, Reynaldo enjoys lifting weights and literature, which he believes gives him a unique perspective into the world of crypto. As an aspiring trader, he is always looking for new opportunities to explore and believes that crypto holds the key to unlocking the future of finance.

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