Celsius Network has been accused of fraud and running its business as a Ponzi scheme, according to a lawsuit filed against the crypto lender Thursday.
Driving the news: The suit was filed by staking software and crypto investment firm KeyFi, which previously worked with Celsius.
- KeyFi CEO Jason Stone alleges the shop owes him “millions of dollars” after failing to honor a “handshake” agreement granting him profit shares of a range of investment strategies.
- On-chain analysis conducted by research firm Arkham Intelligence appears to corroborate some of KeyFi’s claims as it relates to how Celsius operates.
Why it matters: Celsius’ draw was its uber-high yield-generating offers — 5% APY on bitcoin or as much as 10% on dollar-pegged stablecoins — attracting some 1.7 million users by the firms’ account. Now in the wake of halted withdrawals, new allegations say the business operated as a Ponzi scheme.
Context: KeyFi was Celsius’ investment manager from August 2020 to March 2021, managing “billions” for the embattled crypto lender via various DeFi strategies.
What they’re saying: KeyFi’s suit says that Celsius was using customers’ digital asset deposits to “manipulate” markets, among other things.
- Celsius “failed to carry through on promises that induced Plaintiff to undertake various trading strategies,” it alleges.
- The firms’ profits depended on “them earning income above and beyond the amounts they need to pay to consumers for their deposits,” the suit said.
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