Home Crypto Lawsuit accuses Celsius Community of fraud

Lawsuit accuses Celsius Community of fraud

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Earlier this week, a former investment manager at Celsius Network filed suit against the crypto lender, saying it used customer deposits to manipulate the price of its own crypto token and failed to properly manage risk, causing it to freeze customer assets.

According to the complaint, Celsius ran a Ponzi scheme to benefit itself through “gross mismanagement of customer deposits,” and defrauding the plaintiff KeyFi Inc, run by the former manager Jason Stone, into providing services worth millions of dollars and refusing to pay for them.

The suit was filed in New York state court in Manhattan, which seeks unspecified compensatory and punitive damages. Celsius had no immediate comment.

Due to”extreme” market conditions, Celsius’ June 12 decides to freeze withdrawals and transfers for its 1.7 million customers, followed by Stone’s accusations.

The Hoboken, New Jersey-based company has hired advisers for possible debt restructuring, which could include a bankruptcy filing.

This week, Crypto lender Voyager Digital Ltd filed for bankruptcy protection, while the crypto hedge fund entered liquidation late last month.

Retail customers are promised by Celcius with outsized returns up to 19% annually.

As Stone said, due to Celcius’ failure in managing investments, it has resulted in “severe” losses as the values of different coins fluctuated.

Celsius was accused of logging some deposits onto its books on a U.S. dollar basis even if it paid customers with bitcoin or other tokens, causing a $100 million to $200 million hole that it “could not fully explain or resolve.”

According to the complaint, Stone was largely working without a written agreement, generating $838 million of profit for Celsius and KeyFi before costs and overhead from August 2020 to March 2021, with KeyFi entitled to 20% of net profit.

Stone says he quit in March 2021 after it became clear that the hedging issues “could be financially ruinous” for Celsius and damage KeyFi’s reputation. However, Celsius has refused to recognize his resignation.



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