Staking software and investment firm KeyFi Inc. has filed a complaint against beleaguered crypto-lending firm Celsius, alleging the company had been operating in a “Ponzi” style fashion and that it failed to honor a profit-sharing agreement “worth millions of dollars.”
The complaint, filed on July 7, alleges that Celsius has refused to honor a “handshake agreement” in which KeyFi would receive various percentages on the profits it made on Celsius behalf via a number staking and DeFi strategies.
The complaint also accuses Celsius of “negligent misrepresentation” over its risk management controls and “fraud in the inducement” via misleading information of its business operations, which were deployed to induce KeyFi to work with Celsius.
The plaintiff is Jason Stone, CEO of KeyFi. He founded the company in January 2020 and has a background as an investor/investment advisor.
According to the court documents KeyFi served as an investment manager to Celsius between August 2020 and March 2021, during which the duo entered into a Memorandum of Understanding (MOU) which saw the KeyFi work under a special purpose vehicle to be owned by Celsius, dubbed Celsius KeyFi.
While a specific figure owed to KeyFi is not outlined in the complaint, it states the sum is worth “millions of dollars,” and that the companies had agreed on profit shares ranging from 7.5% to 20% depending on the investment strategy.
Notably, there is also a lengthy section of the complaint alleging that Celsius was running a “Ponzi” style operation by luring in new depositors with high interest rates as a way to “repay earlier depositors and creditors.”
Celsius operated as a Ponzi scheme. pic.twitter.com/pGC8vrH3a0
— Dylan LeClair (@DylanLeClair_) July 7, 2022
The complaint seeks a trial by jury, and an award of damages in “an amount to be determined at trial” along with punitive damages in the same vein, pre and post-judgment interest, and an accounting of all assets/funds generated via KeyFi trading activities.
Further claims from Oxb1
A person claiming to be Stone revealed himself to be the leader of the group of pseudonymous DeFi traders behind the Oxb1 address and Twitter account on July 7. The account provided a long rundown of Celsius’ alleged dealings with KeyFi since 2020.
Given the public speculation about the company’s solvency, and my observation of Celsius’ loose relationship with the truth, I feel it is only prudent to finally set the record…
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