Celsius Strikes Back KeyFi, Says Deception and Incompetence Caused Tens of Millions in Losses

Crypto lender Celsius has gone on the offensive against former DeFi staking and strategy partner KeyFi and its CEO, which had sued a week before he left for bankruptcy.

Bankrupt crypto lending firm Celsius thwarted decentralized finance (DeFi) protocol KeyFi and its CEO Jason Stone on Tuesday in U.S. bankruptcy court, claiming Stone misrepresented himself as an expert in DeFi, and that Stone and KeyFi had lost Celsius coins through incompetence and deception. 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 lawsuit, the defendants allegedly stole millions of dollars in coins from Celsius wallets. Additionally, Celsius alleges that the defendants purchased non-fungible tokens (NFTs) with Celsius coins without Celsius's permission, then transferred them to their own wallets before selling them for "seven-figure returns (that 'they pocketed)". The defendants also allegedly bought stakes in other crypto companies with Celsius coins and used Tornado Cash, the crypto privacy protocol recently banned by the US Treasury Department, to hide their activities.

Related: U.S. Administrator Asks Examiner to Investigate Celsius' "Significant Transparency Issues"

Celsius KeyFi was a co-plaintiff in the lawsuit. It was a special purpose vehicle owned by Celsius that KeyFi worked in. Plaintiffs claimed to have lost "several tens of millions of dollars" due to defendants' gross negligence and possibly tens of millions of dollars from converted assets. Furthermore, they claimed that KeyFi failed to return the funds when asked to do so and made frivolous claims against Celsius and tweeted about it:

"As Stone clearly intended, the complaint and Twitter feed generated sensational media reports amplifying his false narrative...