Lawsuit: Ex-Employee Accuses Celsius Network of Financial Fraud Involvement

blockchain.news:

A former investment manager at Celsius Network filed a lawsuit against the popular crypto lending firm on Thursday, claiming that the firm involved itself in market manipulation and failed to create basic accounting controls to safeguard customer deposits.

Jason Stone, the CEO and founder of KeyFi, who was employed by Celsius, filed the matter to the court and used Twitter social media to disclose the fallout between the parties.

Stone revealed that Celsius used clients' deposits to manipulate (rig) the price of its crypto token to earn extra cash. Stone further said Celsius failed to properly hedge risk, an incident that caused Celsius to lose massive funds when the extreme market rout came in. Celsius was forced to freeze customer assets.

Stone stated:

«We discovered Celsius had lied to us. They had not been hedging our activities, nor had they been hedging the fluctuations in crypto asset prices. The entire company’s portfolio had naked exposure to the market.»

Stone said Celsius ran a fraudulent investing scam (Ponzi scheme) to benefit itself through «gross mismanagement of customer deposits.» The complaint further disclosed that Celsius defrauded KeyFi Inc into offering services worth millions of dollars and refusing to pay for them.

Stone further revealed that Celsius struggled to pay investors because of its failure to hedge investments, which resulted in massive losses to the firm as the values of different coins saw extreme fluctuations.

Stone also accused Celsius of logging some deposits onto its cash accounts in U.S. dollar base currency even if the firm paid customers with Bitcoin or other tokens, an incident that caused a $100 million to $200 million holes that the firm could not fully explain or