Mr. Celsius was sued by former investment manager Jason Stone on Thursday as the company continues to be under pressure as cryptocurrency prices plummet. Stone claims, among other things, that Celsius CEO Alex Mashinsky (above) “could have enriched himself considerably.”
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Cryptocurrency lender Mr. Seto has claimed that he has artificially soared the price of his digital coins, was unable to hedge the risk, and engaged in fraudulent activities.
Celsius on Thursday was sued by former investment manager Jason Stone. Cryptocurrency price crash..
The proceedings in New York State Court follow Celsius, which provides customers with an interest in depositing cryptocurrencies, Forced to suspend withdrawal For users facing a liquidity crisis.
When contacted by CNBC, Celsius did not immediately get comments on the proceedings.
Celsius acts like a bank in that when a customer deposits cryptocurrency into a company, it sometimes provides the customer with a yield of close to 19%. The company then lends it to others who are willing to pay high interest rates to borrow the code. Then try to put that money in your pocket to return the yield to your customers.
Stone founded a company called KeyFi, which specializes in crypto trading strategies. Celsius and Keefi have closed a “handshake deal,” the latter company “manages billions of dollars in customer crypto deposits in exchange for some of the profits generated from those crypto deposits,” the proceedings allege. is doing.
“There was no formal written agreement between the parties,” the proceedings said.
According to the proceedings, from August 2020, Mr. Celsius began “transferring hundreds of millions of dollars of crypto assets” to Stone and his team. Celsius set up a wallet on the Ethereum blockchain called “0xb1”. The proceedings allege that the company sent the assets that Stone was planning to deploy here.
Stone has made many claims against Celsius in the proceedings.
The proceedings allege that Celsius and Stone have decided to engage in crypto trading strategies that require effective hedging strategies to manage risk and prevent price fluctuations in certain digital coins. He added that he had a complete grasp of KeyFi’s trading activities.
Stone “repeatedly guarantees” that Celsius executives have made the necessary hedging transactions to ensure that price fluctuations in certain crypto assets do not have a significant and negative impact on the ability of a company or depositor to repay. Claims to have done. Stone and his team relied on these expressions, the proceedings added.
“But these promises were false. Despite repeated guarantees, Celsius implemented a basic risk management strategy to protect against the risks of price fluctuations inherent in many of the investment strategies developed. I couldn’t do it, “the lawsuit claims.
Stone claims that there were “multiple incidents” of Celsius’s “failure to execute basic accounting endangered the customer’s funds.”
Another claim revolves around a digital coin called CEL. It’s a token of Celsius itself. Celsius says that if a user accepts interest payments in the form of CEL, they can earn higher interest than those who do not.
However, the proceedings allege that Celsius made a transaction that artificially raised the price of CEL.
“The purpose of this scheme was fraudulent and illegal. Celsius urged customers to pay with CEL tokens by offering them high interest rates,” the proceedings allege. “Then, by deliberately and artificially raising the price of CEL tokens, Celsius was able to pay customers who chose to receive interest payments in the form of CEL tokens with even less crypto assets. “
Stone also claims that Celsius CEO Alex Mashinsky “could have enriched himself considerably.”
Finally, Stone alleges in the proceedings that Celsius was implementing the “Ponzi scheme.”
The lawsuit alleges that Celsius had “huge debt” to crypto-ether-denominated depositors because he was unable to hedge the transaction risk, but did not maintain holdings of digital coins equal to those debts. increase.
The lawsuit alleges that a customer tried to withdraw either deposit, forcing him to buy more ether at a higher price in the open market (around January 2021) and suffering significant losses. Stone then claims that Celsius began offering double-digit interest rates to seduce new depositors whose funds were used to repay former depositors and creditors.
“Therefore, Celsius continued to market itself as a transparent, well-capitalized business, but in reality it became a Ponzi scheme,” the proceedings claim.
Stone left Celsius in March 2021. He claimed in a lawsuit that Mr. Celsius had a $ 100- $ 200 million hole in his balance sheet at his departure and was “not completely explained or resolved.”
He claims that Celsius maintains control of the “0xb1” Ethereum wallet and that the CEO of Celsius uses it “for his own personal gain.”
In one example, Stone claims that Machine Ski has transferred a valuable non-fungible token (NFT) from his account to his wife’s wallet.