Crypto lender Celsius accuses former money manager of theft

A former money manager for Celsius Network deceived the company about his investing abilities and lost or stole tens of millions of dollars in assets, the bankrupt crypto lender alleged in a lawsuit Tuesday.

Celsius, which filed for bankruptcy last month after freezing customer assets, alleges Keyfi Inc. and founder Jason Stone lied about his investing prowess and was incompetent in managing Celsius assets. The crypto lender also accused Stone of outright theft.

Dania Maxwell/Bloomberg

Stone began managing money for Celsius in 2020, according to the complaint. Unhappy with Keyfi's reporting practices, Celsius demanded the return of coins under Stone's control just months after the arrangement began. Celsius was unable to recover all of the assets and found Keyfi was "extraordinarily inept" at crypto investing and failed to hedge against price swings, according to the lawsuit.

"The Defendants' liability to Celsius is staggering," attorneys for Celsius wrote in the complaint. In addition to mismanagement and deception, the company claims Keyfi converted Celsius assets into nonfungible tokens and stole them, covering its tracks with a so-called crypto mixer recently banned by the U.S. Treasury Department.

The allegations come after Stone sued Celsius last month, accusing the crypto lender of fraud and cheating him out of potentially hundreds of millions of dollars in pay.

"As alleged by KeyFi in the complaint it filed last month, the compensation that KeyFi received (including in the form of NFTs) was expressly authorized by Celsius's CEO Alexander Mashinsky," Kyle Roche, an attorney for Stone, said in an emailed statement. "Celsius's most recent filing is an attempt to rewrite history and use KeyFi and Mr. Stone as a scapegoat for their organizational incompetence."

The bankruptcy case is Celsius Network LLC, 22-10964, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).

— With assistance from Olga Kharif and Zeke Faux.