DeFi entrepreneur Jason Stone – one of the people behind agricultural yield Account 0xb1 and CEO of KeyFi, Inc. — is suing the crypto lending platform Celsius for allegedly refusing to honor his contract. Stone seeks damages in an amount “to be determined at trial.”
In the court case filed in New York on Thursday, KeyFi alleges that Celsius used client funds to “manipulate the markets for crypto assets, failed to institute basic accounting controls that endangered those same deposits, and failed to hold its own.” promises”.
In a lengthy Twitter thread, Stone said the Challenge account 0xb1 managed nearly $2 billion in assets for Celsius at one point and that Celsius had “assured” him that he was taking adequate risk management measures, such as “hedging any potential risk”. impermanent loss of our activities in the liquidity pools.
In August 2020, 0xb1 was created, along with other addresses, to send @CelsiusNetworkCustomer deposits are entrusted to us to manage.
In simple terms, impermanent loss occurs when the price of tokens deposited in a liquidity pool changes from the price at which they were deposited. This can lead to loss of value if traders withdraw in the meantime, although decentralized exchange fees paid to liquidity providers can mitigate losses.
But Celsius’s promises were meaningless, according to Stone.
“At the end of February 2021, we discovered that Celsius had lied to us,” Stone said. wrote. “They hadn’t covered our business, or crypto-asset price fluctuations. The company’s entire portfolio had naked market exposure. »
According to the lawsuit, Stone also learned that Celsius’ alleged lack of proper accounting resulted in a $200 million liability that Celsius “didn’t even understand how or why it owed.”
A few weeks later, in March 2021, Stone and the team behind 0xb1 decided to cut ties with Celsius. But during this departure process, Celsius would have suffered a temporary loss.
Peter said Decrypt via the Telegram message that this process of “unfolding” the KeyFi and Celsius relationship has “no correlation” with the subsequent impermanent loss of Celsius that followed.
Later they ended up accepting the IL for what it was, but claimed that 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.
“Impermanent loss is a function of being in liquidity pools,” he said. Decrypt. “The exposure must be managed.”
Stone wrote on Twitter that Celsius owes KeyFi “a significant amount of money” and has been trying to fix the issue for over a year.
“Celsius refused to acknowledge the truth or their failures in risk management and accounting,” Stone wrote, to add that he is taking legal action against the company in an effort to “settle this issue once and for all.”
Surprisingly, the lawsuit states that Stone and KeyFi “operated without any formal written agreement” while KeyFi allegedly generated hundreds of millions of dollars for Celsius and its customers.
According to the lawsuit, “the recent revelation that Celsius does not have the assets on hand to meet its withdrawal obligations shows that the defendants were in fact operating a Ponzi scheme.”
“As customers sought to withdraw their ether deposits, Celsius was forced to purchase ether on the open market at historically high prices, incurring heavy losses,” the lawsuit explains. “Faced with a liquidity crunch, Celsius began offering double-digit interest rates to attract new depositors, whose funds were used to repay previous depositors and creditors.”
After reading the Celsius-0xb1 lawsuit, my first conclusion is that the industry is a total joke
– Tether gave them a 1b loan??? – Celsius used the BTC client to pump their own token – Performance indicator in USD when liabilities were in ETH – handshake agreement to handle 9 digits
KeyFi’s legal filing comes just weeks after Celsius was reportedly announced consultants hired to help prevent possible bankruptcy following the announcement that Celsius suspended withdrawals on June 13 for all of its customers.
Decrypt did not independently verify the claims in the lawsuit. Celsius has not yet replied to Decryptrequest for comment.
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