Embattled cryptocurrency lender Celsius Network has been accused of fraud and running a Ponzi scheme by a former investment manager.
A complaint filed in New York State court accused Celsius of “gross mismanagement of customer deposits”.
Plaintiff Jason Stone said his business, KeyFi, was tricked into providing services worth millions of dollars, which Celsius allegedly refused to pay for.
The crypto lender had no immediate comment on the lawsuit, which seeks unspecified compensatory and punitive damages.
On July 1, Celsius said it was “focused and working as quickly as we can to stabilise liquidity and operations, in order to be positioned to share more information with the community”.
Stone’s accusations follows Celsius’ June 12 decision to freeze withdrawals and transfers for its 1.7 million customers because of “extreme” market conditions.
The Hoboken, New Jersey-based crypto lender later hired advisers on a possible debt restructuring, which reportedly could include a bankruptcy filing.
Stone said Celsius struggled to pay investors because it failed to hedge investments, resulting in “severe” losses as the values of different coins fluctuated.
He also accused Celsius of logging some deposits onto its books on a US dollar basis even if it paid customers with bitcoin or other tokens, causing a $100 million to $200 million hole that it “could not fully explain or resolve”.
- Reuters, with additional editing by George Russell