Investment manager

Ex-investment manager accuses Celsius of running a Ponzi scheme

A former investment manager at the Celsius Network sued the cryptocurrency lender, accusing the company of using retail investor money to back its own token and failing to properly hedge against a market downturn. He claims this forced Celsius’ decision to freeze all withdrawals earlier this year.

In a complaint seen by ReutersComplainant firm KeyFi, led by former investment manager Jason Stone, claims Celsius ran a Ponzi scheme with “gross mismanagement of client deposits” and defrauded the plaintiff by providing him with services of a worth millions of dollars without payment.

The charges follow Celsius’ decision to unilaterally and suddenly stop withdrawals for its 1.7 million customers on June 12, as well as subsequent decisions such as hiring advisers to restructure their debt and possibly file the balance sheet.

Earlier this week, it was also reported that the company would cut its workforce by 25% and lay off 150 employees.

Stone accused Celsius of mismanaging his funds, including failing to hedge his investments, as their various token holdings fluctuated in valuations, leading to “severe” losses. He also said that the company sometimes accrues Bitcoin and other crypto payments in dollars, causing a $200-300 million hole that “they couldn’t fully explain or resolve.”

According to the complaint, Stone worked without a written contract and generated $838 million in profit before costs and overhead for Celsius and KeyFi between August 2020 and March 2021. It claims KeyFi was owed 20% of that profit, but does not never saw him.

Stone claims to have ended his relationship with Celsius, anticipating their coverage issues would become a problem. The company reportedly refused to recognize his resignation.