Details of the ‘Calendar Scheme’ Internal Work in Celsius Partner Case – The Defiant

The crisis surrounding the centralized crypto lending platform Celsius took a strange turn on July 7 when a former partner assisting in the firm’s asset management accused it of running a “register scheme”.

In a lawsuit filed in the New York Supreme Court, KeyFi Inc., a New York-based asset management firm, pulled the curtain on the internal functioning of Celsius, a company that manages $ 11.8B of assets and rocked the market last month when it blocked customers from withdrawing their crypto deposits. Has done.

‘Total mismanagement’

KeyFi claims Celsius is involved in “gross mismanagement of customer deposits” and has failed to pay millions for asset management services.

The lawsuit argues that Celsius used the customer’s deposit to engage in risky trading strategies while falsely claiming hedging against potential losses. It further alleges that customer funds were used to manipulate the price of CEL tokens in Celsius, which increased by 11,400% between March 2020 and June 2021, according to CoinGecko.

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“These problems … have not only harmed the plaintiffs, but also the millions of people who use the defendant’s platform, as the defendants are now refusing to honor customers’ requests to deposit them and withdraw the assets vested in the defendants,” the lawsuit says. .

It claims Celsius was “operating a register scheme.” Celsius did not immediately respond to a request for comment.

The flute is blowing

On Thursday night, the Twitter account “0x_b1” Out KeyFi CEO Jason Stone himself and the person who manages the customer fund on behalf of Celsius. The case caused a stir on social media and many respondents criticized Stone for not whistling.

“Don’t you think you should have spoken before. Knowing the funds of innocent people [were] At risk, ” Tweets galaxyblu3.

“These problems … have hurt not only the plaintiffs, but thousands of people who use the defendant’s platform.”

Kifai case

Eleutherium Chimed in That Stone “could have informed retailers about this through another account to blow the whistle. You’ve known since 2021 that it’s not a Bueno and it’s a little sad to see you decide not to outreach. “

Stone says he began deploying DeFi and setting strategies for Celsius in mid-2020. According to the lawsuit, Celsius “at the time had no integrated, organized, or comprehensive investment strategy other than lending consumer deposits.” The two organizations have entered into an unusually informal system.

Handshake deal

In the lawsuit, KeyFi says Alex Mashinsky, founder and CEO of Celsius, invested “thousands of dollars” in KeyFi in 2019 and 2020. KeyFi and Celsius have entered into a “handshake agreement” in which the customer deposits crypto in exchange for a portion of the profits from the crypto deposit that KeyFi has managed “billions of dollars”, the complaint said.

KeyFi and Celsius “agreed to deal with each other honestly and prudently and to settle who owes what to whom at a later date,” the complaint said.

Temporary damage

Stone said Kifai proceeded to end its relationship with Celsius in March 2021 after multiple discoveries. When Celsius claimed to be hedging against temporary losses due to possible fluctuations in token prices and liquidity provisions, Stone said he was aware that Celsius’s $ 2B client portfolio had “naked exposure in the market” in February 2021 and that Celsius had a “basic lack”. Security controls to protect billions of dollars. ”

Stone said that after this realization, KeyFi began to end its relationship with Celsius and Celsius realized significant “temporary losses” as a result of the subsequent downtrend, a loss caused by the volatility of the exchange rate in the underlying asset for the liquidity position.

He added that Celsius has logged customer deposits as a USD-defined liability from 2018 to 2020 despite paying for the underlying tokens issued to customers. This results in “a significant loophole in its accounting.”

KeyFi further claims that the $ 1B loan provided by Cetius to the centralized stablecoin issuer, Tether, was used to cover up the fact that Celsius has gone bankrupt with less money in its coffers than the depositors owe.

‘Good luck with that’

The suit is forced to evoke emotion on social media as Celsius shakes to save himself. On July 7, Celsius returned $ 41M to DAI that it had borrowed from MakerDAO. Since July 2, Celsius Maker has returned a total of $ 190M to DAI.

Many observers hit Stone. “So you have promoted yourself to Celsius as a professional trader and Celsius has traded clients’ money in oblivion.[h]Doing business fairly, and now suing Celsius because they don’t want to pay you to waste their clients’ funds … good luck with that, “he said. Says BitMax14.

Others applauded Stone.

Eswenzel Says “Thanks for coming forward. Very interesting reading and I’m curious how it will end (in court).

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