- Complainant claims Celsius ran a Ponzi scheme to enrich itself.
- Celsius completes maker protocol loan repayment.
On Thursday, a former employee of Celsius network instituted legal action against the crypto lender. The employee said the company was using customer deposits to change the price of its native token. Hence, it couldn’t hedge risk properly, which explains why the company had to pause withdrawals.
Details of the court filing
According to the court filing, Celsius was running a Ponzi scheme by grossly mismanaging customer deposits to make profits. Jason Stone’s KeyFi Inc. is suing Celsius; Stone was Celsius’ former investment manager. He claims that Celsius owes him millions of dollars in unpaid services he provided for it.
Stone filed the lawsuit in Manhattan’s New York state court. However, the complainant didn’t specify the exact amount he was owed by Celsius. Also, he didn’t suggest any punitive measures for the crypto lender for failing to pay him. Nevertheless, Celsius has yet to make any comment regarding the matter.
Lawsuit filed by KeyFi vs @CelsiusNetwork in New York today, with damning allegations going back to March 2021, more than a year before the Luna/UST collapse. Verbatim quotes from the pleading in the thread below: 1/24 pic.twitter.com/kgA7dqHW6p
— Cory Klippsten (@coryklippsten) July 7, 2022
Stone’s allegation comes amidst the decision of the crypto lender to pause all transactions on its platform since June 12. The company, with its 1.7 million clients, blamed the general downturn in the market for its actions. Later, the new jersey-based firm hired advisors to help restructure its loan repayment. However, a bankruptcy filing was one of the recommendations of the advisors.
Many industry experts have blamed Celsius’ outrageous returns on its yield program for its current situation. The crypto lender promised up to 19 percent returns annually for its customers willing to lend their crypto assets. However, Stone claimed that Celsius didn’t hedge its investments. Thus, it incurred huge losses due to fluctuation in the values of these digital assets.
That was when it started struggling to pay investors. The former Celsius employee also alleged that Celsius was recording some of its deposits in fiat while paying its customers in digital assets. Hence, there was up to a $200 million loophole that the company couldn’t resolve.
Based on the court filing, Celsius and KeyFi earned nearly $840 million in gross profits between August 2020 and March 2021 through Stone’s efforts. But Stone claimed that KeyFi has the right to 20 percent of the net profits. However, the filing showed that Stone didn’t have any written agreement while working with Celsius.
He further said he stopped working with Celsius in march 2021 when it was clear to him that Celsius’ hedging issues could completely ruin the company’s finances. More importantly, if that happens, it would ruin the reputation of his consulting firm (KeyFi). However, Stone said Celsius had not acknowledged his decision to stop working with them.
Celsius completes its loan repayment
Meanwhile, the Celsius network has completely repaid its maker protocol debt. The repayment means the crypto lender can reclaim more than $440 million in wrapped bitcoin collateral.
Celsius has been making the repayments in bits in the last couple of days. Despite completing this loan repayment, the crypto lender hasn’t given any official statement regarding when it will resume withdrawals on its platform.
NEW: Celsius has finished paying its loan to Maker DAO and got 21,962 WBTC (≈$440M) in collateral back
— Blockworks (@Blockworks_) July 7, 2022
Credit: Source link