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KeyFi Inc. Files A Complaint Against Celsius For Ponzi-Style Fashion

KeyFi Inc., the staking software and investment firm, 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.”

It has been reported that the complaint, filed on Thursday, alleges that Celsius has refused to honor a “handshake agreement” in which KeyFi would receive various percentages of the profits it made on Celsius’s behalf via a number staking and decentralized finance (DeFi) strategies.

However, the complaint also accuses Celsius of “negligent misrepresentation” over its risk management controls and “fraud in the inducement” via misleading information about its business operations, which were deployed to induce KeyFi to work with Celsius.

The report said that the plaintiff is Jason Stone, CEO of KeyFi. He founded the company in January 2020 and has a background as an investor/investment adviser. 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.

Likewise, 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.”

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.

Celsius was said to have struck a business partnership with KeyFi in mid-2020, which saw the creation of the Oxb1 address for KeyFi to receive, manage and invest customer deposits from Celsius. The assets under management (AUM) totaled almost $2 billion by the end of their partnership in March 2021, according to the account.

Thus, the account also stated that Celsius’ risk management team, who monitored the activity of Oxb1, assured KeyFi that “their trading teams were adequately hedging any potential” impermanent loss (IL) and fluctuations in token prices relating to KeyFi investment activities.

Source: Cointelegraph