Crypto lender Celsius sues KeyFi for ‘gross mismanagement’

Troubled crypto-lending platform Celsius filed a counterclaim in US bankruptcy court on Tuesday against Jason Stone and his company KeyFi. In the filing, Celsius alleges that Stone falsely represented himself as a pioneer and expert in coin staking and decentralized finance (DeFi) investments.

“Unfortunately, defendant Stone and KeyFi, Stone’s majority-owned corporate vehicle, proved unable to profitably distribute coins and appear to have lost thousands of Celsius coins due to their gross mismanagement,” Celsius says. “But the defendants were not only incompetent, they were also thieves.”

The Celsius countersuit alleges that Stone and KeyFi stole millions of dollars in coins from wallets controlled by Celsius, and transferred them to wallets they owned. The suit also alleges that Stone used Celsius coins to buy hundreds of NFTs, sending them to their own wallets.

NFTs, or non-fungible tokens, are cryptographically unique tokens that are linked to digital (and sometimes physical) content, providing proof of ownership.

“Stone and/or KeyFi also appear to have used Celsius Coins to acquire interests in a number of blockchain-related companies and platforms that they continue to wrongfully hold,” the countersuit states.

Stone, whose KeyFi was acquired by Celsius in 2020, sued Celsius in July for allegedly refusing to honor the contract. In the lawsuit, KeyFi alleges that Celsius used customer funds to “manipulate the markets for cryptoassets, had failed to implement basic accounting controls that put those same deposits at risk and had failed to follow through on promises.”

That same month, Celsius filed for Chapter 11 bankruptcy protection a month after the company halted all customer withdrawals and swaps, citing liquidity problems that prompted regulators from Alabama, Kentucky, New Jersey, Texas and Washington to open investigations.

Celsius also alleges that Stone used the sanctioned Tornado Cash commingling service to conceal the origin, destination and counterparties of the transfers. The lawsuit alleges that Stone sent $1.4 million through Tornado Cash in September 2021.

In the counterclaim, Celsius asked the court to grant several motions, including the surrender of “retained property” that may have come into the defendants’ possession. Award of damages, including for what Celsius calls “[KeyFi and Stone’s] malicious, willful and malicious conduct.”