KeyFi Files A Lawsuit Against Celsius, Claims That The Firm Owes Money

KeyFi, a DeFi firm, filed a lawsuit against Celsius on Thursday, claiming that the crypto lending company owes it significant money.

Jason Stone, the leader of the 0xb1 address from August 2020 until April 2021, took to Twitter to reveal that he founded KeyFi. Before leading 0xb1, the largest yield farming Ethereum address, Stone founded KeyFi in 2019. KeyFi is a DeFi aggregator that provides intelligent tools for managing customers' DeFi portfolios.

In mid-2020, Celsius began acquisition of KeyFi’s assets and team while Stone devoted his efforts to staking and deploying DeFi strategies for Celsius. With the creation of 0xb1, Celsius' customer deposits were sent to the DeFi aggregator for management purposes.

"Shortly after, Celsius shared the private keys to the addresses with us, and over the ensuing months transferred hundreds of millions of dollars of customer deposits to us for to invest. By the time Celsius and KeyFi parted ways, we were managing nearly $2 billion of assets," Stone said in the Twitter thread.

Celsius' risk management team tracked, monitored, and hedged the performance of 0xb1's assets using tracking applications HedgeGuard and DeBank.

"They assured me that as part of this monitoring, their trading teams were adequately hedging any potential impermanent loss from our activities in liquidity pools. They also assured me they had risk management and hedging in place to account for fluctuations in token prices," Stone added.

However, in late February 2021, 0xb1 realized that Celsius had been "lying to it." The crypto lender was not hedging the activities of the firm and the company’s portfolio had naked exposure to the market.

"After seeing these (and other) major problems in how the company operated, we informed Celsius that we wished to terminate our relationship. That was March 2021. We told Celsius that we would work with them to unwind our various positions over the following months," Stone stated.

In the following turn of events, it was revealed that Celsius reportedly suffered impermanent losses following which it accused KeyFi of stealing. "They completely ignored the fact that they had full visibility into all trading strategies deployed by KeyFi and promised to hedge that exact risk," he revealed.

Stone said Celsius refused to "acknowledge the truth," adding that it owes "a lot of money" to KeyFi. Hence, the firm has filed a lawsuit against the crypto lender in New York state court.

The position of Celsius has weakened to such an extent that the crypto exchange FTX walked away from a deal of acquisition.