Investment Manager Jason Stone, who heads KeyFi Investment Company, is suing the company Celsius Claiming that the company used customer deposits to counterfeit the price of its cryptocurrency (CEL) but failed to properly hedge the risk and as a result was forced to freeze customer assets. “Defendant does not have basic security controls to protect the billions of dollars she held,” Stone claims in the lawsuit.
The lawsuit alleges that Celsius committed a Ponzi scheme to profit as a result of “mismanagement of customer deposits” and that she deceived KeyFi into providing her with millions of dollars worth of services without paying for them. The lawsuit, filed in New York Manhattan Court, did not specify the amount of damages caused to the company or the amount of compensation required.
The lawsuit comes as a follow-up to Celsius’ decision of June 12 to freeze withdrawals and transfers from its customers due to “extreme market conditions.” Stone said Celsius was unable to pay its investors because it failed to hedge investments, resulting in severe losses as the value of various cryptocurrencies changed.
According to Stone, the company has promised its customers an excessive return that also reaches 19% per year. He even accused Celsius of listing some of the deposits in its books on a U.S. dollar basis even if paid with Bitcoin or other cryptocurrencies, creating a $ 100-200 million gap that the company “could not explain or resolve.”
According to Stone, KeyFi worked with Celsius without a written agreement and generated a profit of $ 838 million (before expenses) between August 2020 and March 2021, with KeyFi entitled to 20% of the net profit. Stone said he left the business relationship with Celsius in March last year, immediately after it became clear to him that hedging issues could “destroy Celsius financially” and hurt KeyFi’s reputation, but claimed Celsius refused to acknowledge his resignation.
It was recently reported that Goldman Sachs Investment Bank is trying to raise $ 2 billion from investors to buy assets from Celsius.