Celsius countersues KeyFi, alleging that ineptitude and fraud caused losses of tens of millions of dollars

By: Michael Wilson

Celsius countersues KeyFi, alleging that ineptitude and fraud caused losses of tens of millions of dollars

August 24, 2022 6:19 AM

The CEO of former staking and DeFi strategic partner KeyFi has been targeted by cryptocurrency lender Celsius. KeyFi had sued Celsius a week prior to its bankruptcy.


On Tuesday, insolvent cryptocurrency lender Celsius countersued decentralized finance (DeFi) protocol KeyFi and its CEO, Jason Stone, in the United States Bankruptcy Court, claiming Stone had falsely represented himself as an authority on the subject and that Stone and KeyFi had misappropriated Celsius coins. A few weeks prior, KeyFi had filed a lawsuit against Celsius, alleging that the latter had broken a profit-sharing agreement.


KeyFi offered DeFi strategy and staking services to Celsius. The defendants are accused in the Celsius lawsuit of stealing millions of dollars' worth of coins from Celsius wallets. The defendants allegedly purchased nonfungible tokens (NFTs) with Celsius currencies without the company's consent, transferred them to their personal wallets, and later sold some of them for "seven figure returns" (which they pocketed)."


The defendants are also charged with using Tornado Cash, a cryptocurrency privacy protocol that was recently blacklisted by the US Treasury Department, to mask their operations while investing in other cryptocurrency businesses using Celsius coins.


Celsius In the lawsuit, KeyFi was a co-plaintiff. KeyFi operated inside a special purpose vehicle that belonged to Celsius. The plaintiffs asserted that due to the defendants' egregious conduct and presumably as a result of the converted assets, they had lost "several tens of millions of dollars." They also asserted that KeyFi made baseless accusations against Celsius and neglected to repay payments when asked to do so. They tweeted about this:


"As Stone clearly intended, the lawsuit and Twitter thread generated sensational media coverage that spread his fraudulent story."


On July 7, KeyFi filed a lawsuit against Celsius, stating that Celsius had broken a "handshake agreement" to split earnings following KeyFi's staking and DeFi's planning activities. KeyFi stated that Celsius ran a Ponzi scheme and the agreement was worth millions of dollars. When KeyFi sued Celsius, it was purportedly bankrupt and had already stopped accepting withdrawals as of June 13. A week later, Celsius filed for bankruptcy.