It should be noted that the Celsius platform has been doing much better in recent days. In particular, on Thursday it became known that the company had paid the right amount on its Maker DAO loan. As a result, it received back 21,962 WBTC or approximately $440 million in collateral. Accordingly, the platform’s liability situation has indeed improved.

Celsius platform home page

However, financial liabilities are not everything. Now the platform has new problems that will have to be dealt with in court.

What is going on with Celsius?

In a lawsuit filed on Thursday, a KeyFi executive alleges that Celsius used customer funds to “manipulate the crypto market, failed to maintain basic accounting controls that put customer funds at risk, and also failed to deliver on its promises.”

According to Decrypt’s sources, the 0xb1 account managed around $2 billion worth of Celsius assets. Representatives of the platform “assured” Stone that Celsius considered all risks and took the necessary steps in managing the funds. These include “hedging to prevent any potential for volatile losses from activity in the liquidity pools”.

Non-permanent losses occur when the price of tokens deposited in the liquidity pool changes from the price at which they were deposited. The concept of volatile loss is familiar to those who have spent at least some time dealing with decentralised exchanges. It is explained in more detail in our previous article.

On Twitter, Stone claimed that all the promises made by Celsius management were false. Here is his rejoinder.

At the end of February 2021, we discovered that the Celsius team had lied to us. They had not hedged assets to account for our activity or cryptocurrency price fluctuations. Their entire portfolio was “naked” in relation to the market.

Celsius

The negligence in the platform’s management reached such a huge scale that it once had over $200 million in liabilities. None of the Celsius managers at the time were able to explain to whom they suddenly owed money. After realising Celsius was in trouble, Stone wanted to sever ties with the platform as early as March 2021, but in the meantime it had suffered intermittent losses.

They later admitted the fact of the intermittent losses, but claimed that I was responsible for what had happened. They completely ignored the fact that they had full visibility of all the trading strategies deployed by KeyFi, on top of promising to hedge our risks.

According to Stone, Celsius owes his company “a significant amount of money”, with the matter remaining open for more than a year. He continues.

The Celsius team refuses to admit the truth or its failures in risk management and accounting.

KeyFi’s executive’s lawsuit states that the company collaborated with Celsius “without any formal written agreement”, even though KeyFi was working with hundreds of millions of dollars worth of platform turnover. The fact that Celsius is allegedly unable to meet all its obligations to customers and to other organisations gives reason to “consider the platform a financial pyramid scheme”. Here’s the quote.

As customers sought to withdraw their deposits in Etherium, Celsius was forced to buy ETH on the market at historically high prices, incurring large losses. Faced with a liquidity crisis, Celsius began offering double-digit interest rates to attract new depositors whose funds were used to pay off debts to previous depositors and creditors.

Efirium exchange rate for the year

If everything mentioned in the lawsuit is indeed true, then Celsius’ affairs could be much worse than previously assumed by many. An accusation with the wording “pyramid scheme” is a reason for law enforcement authorities to intervene in the process. And that could end badly for the platform’s team. However, here we are left to wait for developments in what is happening.


We believe that the situation for Celsius is not an easy one. Now its representatives will have to fight not only financial difficulties in the form of liquidity problems, but also in court. However, such a case is unlikely to happen quickly, so the trading platform probably has a chance to get out of the mess and try to restore customer confidence. However, once withdrawals are blocked, it can be very difficult to get them back.

What do you think about it? Share your opinion in our millionaires cryptochat. There we discuss other interesting developments in the blockchain world.