A former employee at bankrupt crypto-lender Celsius has sued the company, calling it a 'Ponzi scheme'

A former investment manager at Celsius is suing the bankrupt crypto lending platform, alleging it committed fraud and calling it a Ponzi scheme. 

Jason Stone, the CEO and co-founder of the Defi firm KeyFi, later Celsius acquired in 2020, filed the complaint in New York on 14th July

His team was tasked with receiving "hundreds of millions of dollars of customer deposits" from Celsius to invest — but the acquisition came with no formal written agreement, according to the lawsuit. 

Stone accuses Celsius of lacking basic security and risk management systems in place, and says the firm now owes money to his company and hundreds of thousands of customers.

Celsius offered users interest in exchange for their crypto holdings that it then lent out to others.

According to the lawsuit, it also used those customers' holdings to artificially raise the price of its own coin, the "Celsius token" or CEL, and failed to account for certain payments that it owed to its users, resulting in a $200 million hole.

The platform viewed those funds as its property, the lawsuit alleges, as is displayed in the terms of service: "Celsius does not hold any Digital Assets on your behalf" but instead are "owned, held and/or controlled by Celsius."

The company then lured in new crypto holders with higher interest rates to try to repay initial depositors and creditors, per the lawsuit.

"The recent revelation that Celsius does not have the assets on hand to meet its withdrawal obligations shows that Defendants were, in fact, operating a Ponzi-scheme," reads the complaint

Stone described the timeline of events, starting in early 2021 when he and his team discovered Celsius had lied about properly hedging potential losses that KeyFi may have seen, he said. 

When Stone told Celsius it wished to cease partnership and detached its Defi tools, he said the lending platform saw "impermanent loss," which it blamed on Stone.

"Given the public speculation about the company's solvency, and my observation of Celsius' loose relationship with the truth, I feel it is only prudent to finally set the record straight," Stone


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