On Tuesday, Celsius Network LLC filed a lawsuit against a former investment manager in which they accused him of stealing or losing tens of millions of dollars in assets before it went bankrupt in the previous month.
Celsius Network filed the complaint in a bankruptcy court in Manhattan against Jason Stone, along with is company KeyFi Inc.
The crypto lender accused their ex-money manager of ‘gross negligence’ and also said that Stone had been ‘extraordinarily inept’ in terms of crypto investing.
The company said that he had advertised himself as a pioneer in crypto investing, but that had not been the case.
According to Celsius, he had been incapable of profitably deploying coins because of which they had had to suffer losses worth tens of millions of dollars.
The crypto lender did not stop with the accusations and said that Stone had then misappropriated assets to purchase thousands of non-fungible tokens (NFTs), which he had stored somewhere inaccessible.
Celsius asserted that Stone had then taken advantage of the crypto mixer called Tornado Cash for covering his tracks.
On August 8th, the US Treasury Department had sanctioned the mixer in question because of its use in covering money laundering activities.
The lawsuit on Tuesday came six weeks after Celsius Network had been sued by KeyFi in a New York court.
The company had accused the crypto lender of running a Ponzi scheme, not properly hedging investments and mismanaging deposits of customers.
Most importantly, the lawsuit filed in Manhattan accused Celsius of cheating Stone out of compensation worth hundreds of millions of dollars.
According to court papers, Stone had worked with Celsius for about seven months which ended in March 2021.
Kyle Roche, the lawyer for Stone, said in a statement that Alex Mashinsky, the chief executive of Celsius Network, had authorized the compensation paid to KeyFi, including the NFTs.
Roche said that the latest filing from the crypto lender was nothing short of an attempt to rewrite history and use Mr. Stone and KeyFi as a scapegoat for their own incompetence.
The crypto market
The purpose of the two lawsuits is the same; recouping funds that each side claims the other owes to them, along with punitive and compensatory damages.
Based in Hoboken, New Jersey, Celsius Network had filed for Chapter 11 bankruptcy on July 13, almost a month after the crypto lender had frozen withdrawals and transfers.
The company had cited ‘extreme market conditions’ as the reason for doing to so to its 1.7 million customers.
The crypto market has been experiencing a downturn for most of 2022 and this has resulted in financial difficulties for a number of companies.
The prices of cryptocurrencies like Bitcoin and Ethereum have massively dropped and this has prompted many businesses to file for bankruptcy, including Three Arrows Capital (3AC) and Voyager Digital.
Celsius has filed for protection against its creditors and intends to generate funds via crypto mining in order to get back on track.