Cody McGrath 
In the complaint filed by KeyFi Inc., Celsius is accused of breaching a multi-million dollar profit-sharing agreement after successfully implementing multiple staking and DeFi tactics for the company.
KeyFi Inc., a staking software and investment company has filed a complaint against struggling cryptocurrency lender Celsius, alleging that the business has been conducting business in a “Ponzi”-style and that it has broken a profit-sharing agreement “worth millions of dollars.”
According to the complaint, which was submitted on July 7, Celsius has disregarded a “handshake agreement” under which KeyFi would be paid various percentages of the profits it generated for Celsius using a variety of staking and DeFi tactics.
Additionally, Celsius is charged with “negligent misrepresentation” regarding its risk management procedures and “fraud in the inducement” due to false statements made about its business practices in order to persuade KeyFi to partner with Celsius.
CEO of KeyFi Jason Stone is the plaintiff. He was an investor and financial advisor before founding the business in January 2020.
According to court records, KeyFi worked as an investment manager for Celsius between August 2020 and March 2021. During that time, the two parties signed a Memorandum of Understanding (MOU) that required KeyFi to operate under the name Celsius KeyFi, a special purpose vehicle that will be owned by Celsius.
The complaint doesn’t provide a precise monetary amount but alleges that KeyFi is owed “millions of dollars” and that the parties had agreed to profit-sharing percentages ranging from 7.5 percent to 20 percent depending on the investment plan.
The case also includes a substantial part that claims Celsius was operating in a “Ponzi” fashion by bringing in new depositors with high-interest rates in order to “repay previous depositors and creditors.”
The case requests a jury trial, “an amount to be established at trial” in terms of damages and punitive damages, pre- and post-judgment interest, and an accounting of all assets and monies made as a result of KeyFi trading activity.
More assertions from Oxb1
On July 7, a person claiming to be Stone identified himself as the person in charge of the team of fictitious DeFi traders operating the Oxb1 address and Twitter account. The account gave a detailed summary of Celsius’ allegedly business activities with KeyFi starting in 2020.
According to reports, Celsius and KeyFi entered into a business collaboration in the middle of 2020, leading to the establishment of the Oxb1 address, which KeyFi used to collect, handle, and invest customer deposits from Celsius. By the time their collaboration came to an end in March 2021, the assets under management (AUM) had reached approximately $2 billion.
According to the report, the risk management team at Celsius gave KeyFi the assurance that “their trading teams were effectively hedging any potential” impermanent loss (IL) and variations in token values related to KeyFi investment activities by keeping an eye on Oxb1’s activity.
Oxb1 claims that this is untrue and that neither their actions nor the changes in the price of crypto assets were hedged.
He said that the entire company’s portfolio was exposed to the market directly.
According to Oxb1, KeyFi decided to end the partnership as a result and unwind its investment holdings gradually over a period of many months. During the relationship, KeyFi was stated to have raised total AUM by $800 million.
However, Celsius purportedly experienced temporary loss when the company sold its positions and blamed Stone.
After a year of attempting to resolve the conflict privately with Celsius, Oxb1 said that he filed the lawsuit and made the situation public. He asserts that Celsius has “refused” to admit its lack of risk management and uphold the original profit sharing provisions of the agreement, and that KeyFi is currently owed a “substantial sum of money.”
“Despite our reasonableness, and due to what I believe was motivated by the massive hole in their balance sheet, Celsius has refused to acknowledge the truth or their failures in risk management and accounting. They have tried to deflect blame to me instead.”