11X Stock Market Accelerator Summit

Eric Fry reveals how an A.I.-based secret could make you up to 11 times RICHER on the same stocks you’re investing in now… without using options, leverage, or anything risky.

Wed, September 27 at 8:00PM ET

Celsius Crypto Rocked by Lawsuit and Fund Mismanagement Allegations


  • The Celsius (CEL-USD) network is landing itself in the courtroom, thanks to a lawsuit by KeyFi.
  • The decentralized finance (DeFi) aggregator platform accuses Celsius of backing out of an agreement, and it even labels Celsius as a Ponzi scheme.
  • These claims come just after Arkham Intelligence’s report, accusing Celsius of mismanaging users’ funds with high-risk, leveraged trades.
Celsius crypto - Celsius Crypto Rocked by Lawsuit and Fund Mismanagement Allegations

Source: Satheesh Sankaran / Shutterstock.com

The Celsius (CEL-USD) network has become the biggest story in crypto right now. Last month, the company first entered the news cycle after freezing withdrawals on its platform. It caught a lot of fire for this move, especially as it catalyzed a trend of other decentralized finance (DeFi) platforms doing the same. Since then, there’s been an avalanche of bad news for the company. Today, the Celsius crypto, CEL, is suffering a one-two punch of bad news — a damning report and a lawsuit.

The report, released by Arkham Intelligence, is loosely related to last month’s withdrawal freeze. See, the company halted withdrawals from its platform as its liquidity was being bled dry. The move halted 500,000 users’ assets. Celsius cites “extreme market conditions” for its decision to do this, and market conditions have indeed been extreme. Bitcoin’s (BTC-USD) dive below $19,000 coincided with a $1 trillion total loss in market capitalization for the crypto industry this year.

But was there more to the move than broader market conditions? Arkham’s report suggests so. The blockchain analytics firm has published a report using on-chain data to accuse Celsius of mismanaging users’ funds.

Specifically, the report accuses Celsius of using $534 million worth of users’ funds to engage in what it calls “high-risk, leveraged crypto trading.” Evidently, this high-risk trading did not pay off for the company. It allegedly lost $390 million of these funds before returning the remaining funds. The report also identifies the asset manager of the fines as a third party — DeFi aggregator KeyFi. Specifically, it names CEO Jason Stone as the manager of the account. Since the report’s release, Stone has confirmed this role. But now, Stone and KeyFi are preparing their retaliation against Celsius in the courtroom.

Celsius Crypto Facing Fraud Lawsuit From Investing Partner

While KeyFi is only just being outed as a major player in Celsius’ misdoings, it is looking to immediately distance itself from the controversial company. A lawsuit by KeyFi accuses Celsius of defrauded investors, conducting a Ponzi scheme and reneging on business agreements. As this news circulates, the Celsius crypto is taking a beating.

The suit, filed yesterday, is primarily centered around the agreement made between the two companies regarding its investing of users’ funds. KeyFi says that the two had a “handshake agreement” over the percentages it would receive of profits it netted on Celsius’ behalf; the main complaint driving the suit is that Celsius refused to honor the previously agreed upon rates. According to KeyFi, these rates ranged between 7.5% and 20%.

However, KeyFi’s complaints make some broader, more detrimental allegations regarding the Celsius network. It accuses the company of misrepresenting the risk associated with using its platform. Moreover, it accuses Celsius of fraudulently misrepresenting its own business practices; this is especially evident alongside the Arkham report.

People throw around the phrase “Ponzi scheme” a lot in the crypto space. But, KeyFi pulls no punches in its legal complaint, going so far as to call Celsius a Ponzi scheme which used new investors’ money to pay off early depositors. KeyFi accuses Celsius of beginning these practices as early as February of 2021, over a year before bear market which Celsius blames for its withdrawal freeze.

As this news permeates the market, the Celsius crypto, CEL, continues its tumble downward. Today, the token is losing over 12% of its value while investors sell off their holdings. Since the beginning of 2022, the token has lost over 79%.

On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.

Article printed from InvestorPlace Media, https://investorplace.com/2022/07/celsius-crypto-rocked-by-lawsuit-and-fund-mismanagement-allegations/.

©2023 InvestorPlace Media, LLC