Celsius countersues KeyFi, claims deceit and incompetence led to tens of millions in losses

Bankrupt crypto lending company Celsius countersued decentralized finance (DeFi) protocol KeyFi and its CEO Jason Stone on Tuesday in the United States Bankruptcy Court claiming Stone misrepresented himself as an expert in DeFi and Stone and KeyFi lost Celsius coins through incompetence and deceit. The suit came several weeks after KeyFi sued Celsius for allegedly failing to honor a profit-sharing agreement. 

KeyFi provided Celsius with staking services and DeFi strategy. According to the Celsius suit, the defendants allegedly stole millions of dollars in coins from Celsius wallets. Further, Celsius alleges, the defendants bought nonfungible tokens (NFTs) with Celsius coins, without Celsius authorization, and then transferred them to their won wallets and sold some of them for “seven figure returns (which they pocketed).” The defendants also allegedly bought interests in other crypto companies with Celsius coins and used Tornado Cash, the crypto privacy protocol recently banned by the U.S. Treasury Department, to hide their activities.

Related: US Trustee motions for examiner to probe Celsius’ ‘significant transparency issues’

Celsius KeyFi was a co-plaintiff in the suit. It was a special purpose vehicle owned by Celsius that KeyFi worked within. The plaintiffs claimed they lost “many tens of millions of dollars” through the defendants’ gross negligence and possibly tens of millions of dollars from converted assets. Further, they claimed, KeyFi failed to return funds when requested to do so and made frivolous claims against Celsius and tweeted about it:

“As Stone clearly intended, the complaint and twitter thread generated sensational media reports amplifying his false narrative.”

KeyFi sued Celsius on July 7 alleging that Celsius failed to honor a “handshake agreement” to share profits after KeyFi’s staking and DeFi strategizing activities. KeyFi claimed the agreement was worth millions of dollars and Celsius operated as a Ponzi scheme. Celsius had suspended withdrawals on June 13 and was reportedly insolvent when KeyFi sued it. Celsius filed for bankruptcy a week later.