KeyFi, the former staking and DeFi strategy partner, has been targeted by cryptocurrency lender Celsius who had sued Celsius a week prior to its bankruptcy.
On Tuesday, insolvent cryptocurrency lender Celsius countersued decentralized finance (DeFi) protocol KeyFi and its CEO Jason Stone in the United States Bankruptcy Court, claiming Stone had falsely represented himself as an authority on the subject and that Stone and KeyFi had misappropriated Celsius coins. A few weeks prior, KeyFi had brought legal action against Celsius for allegedly breaching a profit-sharing arrangement.
KeyFi offered Celsius DeFi strategy and staking services. The defendants are accused in the Celsius lawsuit of stealing millions of dollars’ worth of coins from Celsius wallets. The defendants allegedly purchased nonfungible tokens (NFTs) with Celsius currencies without the company’s consent, transferred them to their personal wallets, and later sold some of them for “seven figure returns (which they pocketed).”
Additionally, it is claimed that the defendants used Tornado Cash, a cryptocurrency privacy protocol that the United States Treasury Department recently outlawed, to purchase shares in other cryptocurrency businesses in order to conceal their actions.
KeyFi operated inside a special purpose vehicle that belonged to Celsius. The plaintiffs asserted that due to the defendants’ egregious conduct and presumably as a result of the converted assets, they had lost “several tens of millions of dollars.” They also asserted that KeyFi made baseless accusations against Celsius and failed to return funds when asked to do so. They tweeted about this:
“As Stone clearly intended, the complaint and Twitter thread generated sensational media reports amplifying his false narrative.”
On July 7, KeyFi filed a lawsuit against Celsius, stating that Celsius had broken a “handshake agreement” to split earnings following KeyFi’s staking and DeFi’s planning activities. KeyFi stated that Celsius ran a Ponzi scheme and the agreement was worth millions of dollars. When KeyFi filed a lawsuit against Celsius, it had already stopped accepting withdrawals as of June 13. Celsius filed for bankruptcy a week later.