KeyFI Ceo Will Sue Celsius For Becoming A Ponzi Scheme

The KeyFI CEO Jason Stone, alleged that Celsius used customer funds to manipulate markets and will suit it for becoming a Ponzi Scheme so let’s read more today in our latest cryptocurrency news.

Jason Stone is one of the individuals behind the yield farming account 0xb1 and the KeyFI CEO so now he is suing the lending platform for refusing to honor its contract. Stone Is looking for damages for an amount that hasn’t been determined yet. In the lawsuit, KeyFi alleged that celsius used customer funds to manipulate the crypto-asset markets and failed to institute basic accounting controls that put the user’s funds in danger, and failed to carry through the promises.

After discussions with @CelsiusNetwork in mid 2020, Celsius began an acquisition of KeyFi’s assets and team. Thereafter, I pivoted KeyFi to staking and deploying DeFi strategies for Celsius.

— 0xb1 (@0x_b1) July 7, 2022

Stone said that the Defi account 0bx1 was managing $2 billion in assets for Celius and that at one point, Celsius assured him that he will take risk management measures like hedging impairment losses from their activities in liquidity pools. The impermanent loss happens when the price of the tokens deposited into the liquditiy pool changes compared to the price at which they were deposited. This can lead to a loss of value if the traders withdrew in the interim so the decentralized exchange fees paid to the providers could mitigate the losses. Stone wrote:

“In late Feb 2021, we discovered Celsius had lied to us. They had not been hedging our activities, nor had they been hedging the fluctuations in cryptoasset prices. The entire company’s portfolio had naked exposure to the market.”

They later came to accept the IL for what it was, but claimed I was responsible for it. They completely ignored the fact that they had full visibility into all trading strategies deployed by KeyFi and promised to hedge that exact risk.

— 0xb1 (@0x_b1) July 7, 2022

According to the lawsuit, Stone learned that Celsius’ alleged lack of proper accounting led to a $200 million liability that Celsius didn’t understand. A few weeks later, Stone and the team behind 0xb1 decided to cut ties with Celsius but at the same time, Celsius suffered major impermanent losses. Stone said that the unwinding process of the KeyFi and Celsius relationship has no correlation with the Celius impermanent loss which followed:

“Impermanent loss is a function of being in liquidity pools. The exposure needs to be managed.”

Stone wrote that Celsius owes KeyFi a huge sum of money and he was trying to resolve the issue for a year now:

“Celsius has refused to acknowledge the truth or their failures in risk management and accounting,” Stone wrote, adding that he is taking legal action against the firm in an effort “to settle this issue once and for all.”

According to the lawsuit:

“As customers sought to withdraw their ether deposits, Celsius was forced to buy ether in the open market at historically high prices, suffering heavy losses. Faced with a liquidity crisis, Celsius began to offer double-digit interest rates in order to lure new depositors, whose funds were used to repay earlier depositors and creditors.”