Celsius Countersues KeyFi, Claims Millions Stolen From Wallets

Celsius has alleged KeyFI CEO Stone falsely depicted himself as a pioneer and expert in crypto staking and DeFi investments

article-image

blockworks exclusive art by axel rangel

share

key takeaways

  • Celsius claims KeyFi and Stone used recently-sanctioned crypto mixer Tornado Cash to cover their tracks
  • Stone’s lawyer said Celsius’ lawsuit is an attempt to rewrite history and mask its own incompetence

Decentralized finance (DeFi) startup KeyFi last month sued its business partner Celsius over allegations of running a Ponzi scheme. 

Now, the bankrupt crypto lender is countersuing, claiming that KeyFi CEO Jason Stone stole millions of dollars in cryptocurrencies.

In the complaint filed Tuesday in Manhattan, Celsius alleges Stone falsely depicted himself as a pioneer and expert in crypto staking and DeFi investments. Celsius claims Stone was incapable and lost its digital assets through “gross mismanagement.”

“The defendants were not just incompetent, they also were thieves,” Celsius said in its suit. Stone and KeyFi stole “many tens of millions of dollars from Celsius wallets, misappropriated cryptoassets to buy and steal non-fungible tokens (NFTs) and pocketed seven-figure returns,” the firm said. 

Court documents claim Stone managed Celsius’ cryptoasset investments from August 2020 to March 2021.  

Celsius also accused the parties of using recently-sanctioned crypto mixer Tornado Cash to disguise their tracks. “Stone and KeyFi laundered millions of dollars of Celsius property (or its proceeds) through Tornado Cash on dozens of occasions,” it said.

Tuesday’s countersuit comes about seven weeks after the DeFi startup accused Celsius of failing to honor a profit-sharing agreement in a July 7 lawsuit.

KeyFi also alleged Celsius actively used customer funds to manipulate cryptoasset markets to their benefit, and that it spent customer bitcoin deposits to inflate its CEL token. 

CEL surged up to 1,770% between September 2020 and September 2021, alongside bitcoin. The token is down 66% so far this year, but has recovered some of the losses since Celsius’ withdrawal freeze in June, Blockworks Research’s portal shows.

Celsius seeks the return of its property and damages to be paid due to breaches of duty, while KeyFi is pursuing similar relief. Celsius and KeyFi weren’t immediately available for comment.

Stone’s lawyer Kyle Roche said on Twitter that the compensation KeyFi received, including NFTs, was “expressly authorized” by Celsius CEO Alex Mashinsky.

“Celsius’s most recent filing is an attempt to rewrite history and use KeyFi and [Stone] as a scapegoat for their organizational incompetence,” Roche wrote.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

The stock price jump comes after Coinbase reported ending its seven-quarter run of net losses during the fourth quarter

article-image

BUZZ holds shares of Coinbase, Robinhood and MicroStrategy

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders

article-image

Trading volumes totalled $154 billion in Q4, including $125 billion in institutional volume