🏛 Celsius Partner Details Inner Workings of ‘Ponzi Scheme’ in Lawsuit
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Asset Manager Claims Celsius Engaged in 'Gross Mismanagement' of Deposits
By Samuel Haig
STRANGE TURN The crisis engulfing Celsius, the embattled centralized crypto lending platform, took a strange turn on July 7 when a former partner that helped manage assets for the firm accused it of running a “Ponzi scheme.”
LAWSUIT In a lawsuit filed in New York Supreme Court, KeyFi Inc., a New York-based asset management firm, pulled back the curtain on the inner workings of Celsius, a company that manages $11.8B in assets and rocked the market last month when it blocked customers from withdrawing their crypto deposits.
FALSE HEDGE KeyFi claims Celsius engaged in the “gross mismanagement of customer deposits” and failed to pay it millions for asset management services. The suit argues that Celsius used customer deposits to engage in risky trading strategies while falsely claiming to be hedging against potential losses. It also alleges that customer funds were used to manipulate the price of Celsius’ CEL token, which rallied 11,400% between March 2020 and June 2021, according to CoinGecko.
By Owen Fernau
NEWS While Terra’s collapse may have cast a shadow over stablecoins, one big DeFi player doesn’t appear to be deterred. Aave Companies, the centralized entity that stewards the Aave lending protocol, proposed a new dollar-pegged stablecoin to the protocol’s DAO on July 7. The GHO stablecoin would be minted by borrowing against assets locked as collateral on Aave.
YIELD Borrowers would still earn yield on their deposited assets, while also racking up interest on their borrowed GHO, according to Aave Companies’ proposal. The interest payments would go directly to the DAO treasury, and could be considered revenue, a welcome word in a bear market.
POWER “The power of DeFi is that GHO allows more liquidity for decentralized stablecoin[s] in the market, more fees for Aave, more volume and fees for Curve, more stability for other stablecoins, more attractiveness of DeFi in general compared to CeFi,” wrote Mark Zeller, integrations lead at Aave.
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NEWS Embattled crypto lender Celsius Network has paid off its debt to MakerDAO, a sign the platform is recovering from its recent near-death experience.
COLLATERAL On July 7, Celsius repaid the remaining $41.2 million in DAI it had borrowed from the collateralized debt protocol, according to data on DeFi Explore, an analytics platform. It then proceeded to withdraw all the wrapped Bitcoin (WBTC) it had put up as collateral for the loan. Celsius later transferred more than $500M in wrapped Bitcoin to crypto exchange FTX.
ASSETS In the past week, Celsius has been aggressively paying down its debt and freeing up assets locked in MakerDAO. Since July 2, it has paid down $190 million in DAI owed to the protocol and withdrawn 23,000 wrapped Bitcoin, worth nearly $450M. Bitcoin was changing hands at $21,361 in afternoon trading New York time.
Ethereum Scaling Solution Picking Up Mojo with On-Chain Project
By Samuel Haig
GOOD START If building your project during hard times is the true test of DeFi, then Polygon is off to a good start in this bear market as it solidifies its position as a leading Ethereum scaling solution.
AVATARS On July 7, Reddit, the popular social networking website, launched an NFT marketplace for online avatars that is powered by the Polygon PoS Chain, Polygon’s commit chain and flagship Ethereum scaling solution.
GLOW-LIKE Reddit has created 90 designs for its early-access series of nonfungibles with the total number of tokens going on sale tipped to total “tens of thousands.” The NFTs come with licensing rights allowing them to be used as avatars on other online platforms and will exhibit a “glow-like effect” next to comments posted on Reddit.
METAVERSE Even amid the fallout from the crises at Celsius and Three Arrows Capital, the metaverse continues to take shape.
APE REALM This week saw a slew of updates from popular NFT projects including Yuga’s Otherside and RTFKT’s CloneX. Move-to-earn project Stepn is offering Bored Ape holders a free mint in its ‘Ape Realm’ in an attempt to cross-pollinate the communities, and Reddit has launched an NFT avatar marketplace in partnership with Polygon.
VOLUME ENS domains topped the volume charts this week with over 6,800 ETH ($8.5M) traded as collectors snapped up non-English numbers and combinations.
The troubled crypto lending firm Celsius reportedly used its customers’ funds worth $534 million to execute "high-risk leveraged crypto trading strategies" through a third-party asset manager, a new report by blockchain analytics firm Arkham Intelligence says.
Web3 community members are fighting back against the United States Supreme Court’s ruling to overturn Roe v. Wade.
It’s been well over a decade since the publishing of the Bitcoin white paper. During that time the crypto industry was born.
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Voyager Delivers Painful Lesson on Perils of Counterparty Risk in Bankruptcy Drama In late June, the top executives at Voyager Digital, a cryptocurrency exchange with 3.5M users, knew they were in deep trouble. Three Arrows Capital, the Singapore-based hedge fund, owed it hundreds of millions worth of crypto and showed no signs of servicing the debt.
Celsius, the embattled CeFi lending platform, is aggressively paying down its debt and freeing up assets previously locked in MakerDAO, a collateralized debt protocol.
🧑💻 ✍️ Stories in The Defiant are written by Owen Fernau, Aleksandar Gilbert, Claire Gu, Samuel Haig, Jason Levin, and yyctrader, and edited by Edward Robinson, yyctrader and Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access, while free signups get only part of the content.Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button above ($15/mo, $150/yr.