A new lawsuit claims that embattled cryptocurrency lender Celsius is a “Ponzi scheme” and has defrauded investors of their money.
Specifically, the lawsuit alleges that Celsius has artificially inflated the price of its own digital coin, called CEL, failed to hedge risk, and engaged in fraudulent activities.
The lawsuit has been brough by investment manager Jason Stone as pressure continues to mount on Celsius amid a crash in cryptocurrency prices and a liquidity crisis at the firm.
The lawsuit comes after Celsius, which offers customers interest for depositing their cryptocurrency with it, halted all withdrawals for its users as it faces liquidity problems.
Celsius acts like a bank in that it offers customers yield, sometimes as high as 19%, if they deposit their cryptocurrency with the company. Celsius then lends that cryptocurrency out to others willing to pay a high interest rate to borrow it.
Stone runs a company called “KeyFi” that specializes in cryptocurrency trading strategies. Celsius and KeyFi had a “handshake deal” in place where KeyFi would manage billions of dollars in customer cryptocurrency deposits in return for a share of the profits generated.
Stone makes several allegations against Celsius in his lawsuit, including that Celsius executives assured him that the company had undertaken the necessary hedging strategies to ensure price fluctuations of cryptocurrency assets would not negatively impact the company or its ability to repay depositors.
Stone also claims that there were multiple occasions when Celsius’ “failure to perform basic accounting endangered customer funds.” Most problematic, Stone alleges in the lawsuit that Celsius was run as a “Ponzi scheme.”
Stone says in the lawsuit that he was aware of a $100 million to $200 million hole in Celsius’ balance sheet that the company “could not fully explain or resolve.”
