Shalini Nagarajan

<div id="highlights-block_6305f0a3d13f2" class="highlights">
 <ul>
 <li>Celsius claims KeyFi and Stone used recently-sanctioned crypto mixer Tornado Cash to cover their tracks</li>
 <li>Stone’s lawyer said Celsius’ lawsuit is an attempt to rewrite history and mask its own incompetence</li>
 </ul>
 
</div>



Decentralized finance (DeFi) startup KeyFi last month sued its business partner Celsius over allegations of running a Ponzi scheme. 



Now, the bankrupt crypto lender is countersuing, claiming that KeyFi CEO Jason Stone stole millions of dollars in cryptocurrencies.



In the complaint filed Tuesday in Manhattan, Celsius alleges Stone falsely depicted himself as a pioneer and expert in crypto staking and DeFi investments. Celsius claims Stone was incapable and lost its digital assets through “gross mismanagement.”



“The defendants were not just incompetent, they also were thieves,” Celsius said in its suit. Stone and KeyFi stole “many tens of millions of dollars from Celsius wallets, misappropriated cryptoassets to buy and steal non-fungible tokens (NFTs) and pocketed seven-figure returns,” the firm said.&nbsp;



Court documents claim Stone managed Celsius’ cryptoasset investments from August 2020 to March 2021.&nbsp;&nbsp;



Celsius also accused the parties of using <a href="https://cms.blockworks.co/us-treasury-bans-citizens-from-using-mixing-service-tornado-cash/" target="_blank" rel="noreferrer noopener">recently-sanctioned</a> crypto mixer Tornado Cash to disguise their tracks. “Stone and KeyFi laundered millions of dollars of Celsius property (or its proceeds) through Tornado Cash on dozens of occasions,” it said.



Tuesday’s countersuit comes about seven weeks after the DeFi startup accused Celsius of failing to honor a profit-sharing agreement in a <a href="https://iapps.courts.state.ny.us/nyscef/ViewDocument?docIndex=RvF30Mz2IZW63s1mjjau2Q==" target="_blank" rel="noreferrer noopener">July 7 lawsuit</a>.



KeyFi also alleged Celsius actively used customer funds to manipulate cryptoasset markets to their benefit, and that it spent customer bitcoin deposits to inflate its CEL token.&nbsp;



CEL surged up to 1,770% between September 2020 and September 2021, alongside bitcoin. The token is down 66% so far this year, but has recovered some of the losses since Celsius’ <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">withdrawal freeze</a> in June, <a href="https://www.blockworksresearch.com/assets/cel" target="_blank" rel="noreferrer noopener">Blockworks Research</a>’s portal shows.



Celsius seeks the return of its property and damages to be paid due to breaches of duty, while KeyFi is pursuing similar relief. Celsius and KeyFi weren&#8217;t immediately available for comment.



Stone’s lawyer Kyle Roche <a href="https://twitter.com/KyleWRoche/status/1562113078187155457" target="_blank" rel="noreferrer noopener">said on Twitter</a> that the compensation KeyFi received, including NFTs, was “expressly authorized” by Celsius CEO Alex Mashinsky.



“Celsius’s most recent filing is an attempt to rewrite history and use KeyFi and [Stone] as a scapegoat for their organizational incompetence,” Roche wrote.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

keyfi