Celsius claims that KeyFi stole millions in crypto from the now-bankrupt crypto lender.
The company’s filing claims that KeyFi CEO Jason Stone mismanaged and embezzled Celsius digital assets on several occasions.
Stone is also accused of using company coins to purchase NFTs like Crypto Punks and leveraging sanctioned cryptocurrency mixer Tornado Cash to cover his tracks.
The crypto lender is now seeking legal redress against both Stone and KeyFi in a bid to recover assets.
In a new filing on Tuesday, beleaguered crypto lender Celsius claims that KeyFi and its CEO Jason Stone mismanaged and stole millions from the company after receiving access to company assets and crypto wallets.
KeyFi is a decentralized finance (DeFi) solution that allows users to manage their assets and portfolios from a single dashboard. The service was launched and founded by Jason Stone in 2019. Later in 2020, the firm began acquisition talks with Celsius and the pair formed an agreement pertaining to staking and other DeFi services.
Celsius Says Stone and KeyFi Broke Agreement On Several Occasions
At the time, Stone and KeyFi received access to an Ethereum wallet address that supposedly held customer deposits. The address is commonly known within the crypto community by the starting sequence of the wallet – 0xb1.
However, the crypto lender claims that neither Stone nor KeyFi kept to the agreement. Tuesday’s filing said that Stone “stole millions of dollars in coins” from wallets controlled by the crypto lender, one of which was 0xb1.
The filing further stated that KeyFi mismanaged funds resulting in heavy losses for the company. Furthermore, Stone allegedly used coins from company wallets to purchase non fungible tokens (NFTs) from collections like Crypto Punks and Bullrun Babes.
Furthermore, Stone is accused of transferring company digital assets including hundreds in Ether (ETH) to an external wallet identified as 0x1C. The ETH was deployed for more NFT purchases, per the filing.
Lawyers claim that KeyFi and Stone also attempted to cover their tracks by leveraging cryptocurrency mixer Tornado Cash. The Ethereum-based mixing protocol allows users to obscure the destination of their transactions and bolster privacy when transferring virtual currencies.
Notably, the service was recently sanctioned by the U.S. Treasury Department.
According to the filing from Celsius, Stone and KeyFi have failed to return the cryptocurrencies the pair allegedly lost on several occasions. The filing also argued that Stone has created false accusations against the crypto lender to avoid returning the company coins.
The Defendants’ liability to Celsius is staggering. The coins the Defendants apparently lost through their gross negligence alone are worth many tens of millions of dollars, and the assets that they converted, and the proceeds of those assets, may be worth tens of millions more.
Lawyers from Akin Gump Strauss Hauer & Feld LLP noted that all mismanaged and supposedly stolen assets must be turned over for the benefit of creditors. At press time, the crypto lender is undergoing liquidation after filing for bankruptcy back in July.