Former asset manager, KeyFi files a lawsuit and claims Celsius is an elaborate “Ponzi Scheme” as they sue the troubled company on July 7th.
Celsius used client funds to raise the price of its own CEL coin and influence broader cryptocurrency markets, the lawsuit, filed in New York state court in Manhattan, claims.
However, due to its inability to adequately manage risk, the company is currently facing a liquidity crisis and withdrawals have been blocked.
KeyFi, which managed assets for Celsius until March of last year, filed the lawsuit which also claims that KeyFi services were not paid.
According to Jason Stone, a main plaintiff in the case, KeyFi formerly managed roughly $2 billion in assets for Celsius. During this time, the asset manager became aware of the fact that Celsius lacked risk hedging.
The lender’s liquidity crisis is a result of Celsius’s chronic lack of risk management – Stone stated in a Twitter thread.
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. I have brought legal action against Celsius to settle this issue once and for all.
— 0xb1 (@0x_b1) July 7, 2022
Celsius has recruited restructuring counsel and is currently discussing a potential bankruptcy, according to recent rumors.
Celsius is now working to pay off its debts to several lenders. The platform just settled its debt with Maker DAO. However, it quickly moved $500 million in Wrapped Bitcoin to FTX. This might imply that Celsius is planning to dump the token in order to improve its liquidity.
While such a case may assist the lender to avoid bankruptcy, it would have a detrimental influence on Bitcoin(BTC) values. However, it is uncertain if the lender would be able to fully compensate its consumers.