Celsius accuses both Prime Trust & Keyfi of malpractices.
Crypto lending platform Celsius Network has filed a lawsuit claiming that custodian Prime Trust failed to turn over roughly $17 million worth of cryptocurrency. In a Tuesday filing with the U.S. Bankruptcy Court in the Southern District of New York, Celsius’ legal team brought a complaint against Prime Trust, alleging the company did not return $17 million worth of crypto assets in June 2021 when it terminated its relationship with the lending firm. According to Celsius, Prime Trust acted as crypto custodian for New York- and Washington-based users from 2020 through mid-2021, returning $119 million in crypto following the end of the business arrangement but holding back some funds: 398 Bitcoin (BTC), 3,740 Ether (ETH), 2,261,448 USD Coin (USDC) and 196,268 Celsius (CEL).
“Upon the commencement of these bankruptcy proceedings, Prime Trust was obligated under the Bankruptcy Code to deliver all property belonging to Celsius that is in Prime Trust’s possession to Celsius, including these remaining crypto assets, and should be ordered to turn them over now pursuant to section 542 of the Bankruptcy Code,” said the filing. “Alternatively, Celsius seeks specific performance of certain contractual provisions obligating Prime Trust to deliver and transfer the crypto assets to Celsius.”
The legal team added: “Celsius sought for many months to persuade Prime Trust to honor its obligations and transfer identified Subject Property to Celsius. At times, it appeared those efforts were close to being rewarded. However, to this day, Prime Trust continues to withhold wrongfully Subject Property that Celsius has directed Prime Trust to release.”
In July, Celsius filed for Chapter 11 bankruptcy after closing debts owed to Compound (COMP), Aave (AAVE) and Maker (MKR). Cointelegraph reported on Aug. 16 that the crypto lending platform was on track to run out of money by October, with a report suggesting the company’s debt was closer to $2.8 billion against its bankruptcy filing claims of $1.2 billion deficit. At the time of publication, the combined value of the BTC, ETH, USDC, and CEL tokens Celsius claimed from Prime Trust was roughly $17.4 million. Cointelegraph reported on Aug. 13 that despite the bankruptcy proceedings, the price of Celsius’ CEL token had surged more than 4,000% since June, hitting a three-month high of $3.86. However, the price has since dropped more than 50% since that peak, reaching $1.67 as of Tuesday.
According to a document filed with the Southern District of New York, crypto lending firm Celsius Network and Celsius KeyFi introduced a lawsuit against trading firm KeyFi and Jason Stone. The crypto lending firm claims Stone and his company were “incompetent” and “deceitful” during their partnership. In the complaint, Celsius Network asked for the return of alleged stolen property and for the payment of supposed damages caused by Stone and KeyFi. The latter parties previously filed a lawsuit against their former partner.
As Bitcoinist reported two months ago, Stone accused Celsius and its CEO Alex Mashinsky of defaulting on contract obligations and operating a “Ponzi scheme”. The crypto lending company recently filed for bankruptcy in the state of New York and has been in the spotlight for failing to meet financial obligations. According to Stone, Mashinsky hired him to trade with funds obtained from their clients and generate profits to pay the high yield offered on its platform. Stone and Celsius created a company called Celsius KeyFi to conduct their operations which were managed under the famous Ethereum address Oxb1. At some point, Celsius KeyFi handled over $2 billion from the crypto lending platform clients. This happened without the users’ knowledge or consent. Stone allegedly stuck to this agreement until late 2021 when they allegedly discovered that Celsius failed to implement risk management strategies to mitigate potential risk.
In the document filed by the Mashinsky-led company, the story changes. The company accuses Stone of allegedly misrepresenting his skills and of running an unprofitable trading strategy that led to the “lost of thousands of Celsius coins through their gross mismanagement”. The complaint claims: the Defendants (Jason Stone) stole millions of dollars in coins from Celsius “wallets” – blockchain addresses where coins and other digital assets can be stored – by transferring them to wallets that, upon information and belief, are controlled by the Defendants. In addition, without any notice to or authorization from Celsius, the Defendants began to use Celsius coins to buy hundreds of non-fungible tokens (“NFTs”), and then stole the NFTs they acquired with Celsius’ coins by sending them to wallets that, upon information and belief, they own or control. CEL’s price trends to the downside on the 4-hour chart.
Furthermore, the document claims Stone and his company allegedly use Tornado Cash, the Ethereum-based decentralized exchange recently sanctioned by the U.S. Treasury, to launder the funds. Due to the nature of Tornado Cash, it’s hard to check the validity of these statements. However, journalist Amy Castor believes Celsius might be trying to discredit Stone and the affirmations on his lawsuit. Castor said via Twitter: Celsius is trying hard here to discredit Stone’s earlier lawsuit, claiming Stone was looking to score a “public relations victory” and his story was just “fantasy.” A legal representative for KeyFi responded to the counter-lawsuit and the claims made by Celsius saying that it is an attempt to “rewrite history”. The legal representative said that the crypto lending firm is allegedly using Stone and KeyFi as “a scapegoat for their organizational incompetence”.
