Celsius Network did not properly hedge risk and manipulated its exchange to rig the price of its own crypto token, according to a suit filed by a former investment manager.
In a Twitter thread by the account known for managing the 0xb1 address, Jason Stone narrated his experience with the crypto exchange and how it led him to file a legal action. Stone said that he led the team managing the 0xb1 address and also founded KeyFi, which Celsius acquired starting in 2020.
“Celsius shared the private keys to the addresses with us, and over the ensuing months transferred hundreds of millions of dollars of customer deposits to us for to invest. By the time Celsius and KeyFi parted ways, we were managing nearly $2 billion of assets,” Stone tweeted.
But down the line, Stone discovered that Celsius has not been hedging KeyFi’s activities nor the possible fluctuation risks in prices.
“[We] discovered Celsius had lied to us… The entire company’s portfolio had naked exposure to the market,” Stone added.
By April 2021, KeyFi’s assets under management grew by over US$800 million, the same time that Stone’s team was planning to part ways with Celsius. As a result, the crypto exchange suffered an impermanent loss.
“At first, they believed the impermanent loss was evidence of KeyFi stealing and accused me of being a thief,” Stone further tweeted. “They later came to accept the [impermanent loss] 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.”
Stone claims that he tried to quietly settle the dispute and that Celsius still owes KeyFi “a significant sum of money.”
“Despite our reasonableness, and due to what I believe was motivated by the massive hole in their balance sheet, Celsius has refused to acknowledge the truth or their failures in risk management and accounting. They have tried to deflect blame to me instead,” he added.
Stone’s KeyFi filed the suit against Celsius in the New York Supreme Court, claiming that the latter benefitted itself through “gross mismanagement of customer deposits” and defrauded KeyFi by not settling the bill for the services rendered.
The legal move follows after almost a month after Celsius paused all withdrawals, transfers, and swaps–which led to a liquidity crisis.
Information for this briefing was found via Reuters and Twitter. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
