Lava, a lender of USD and stablecoins that accepts bitcoin (BTC) as collateral and that closely marketed its affinity with the Bitcoin group, is on the heart of a social media firestorm.
In truth, it’s going through a flurry of allegations so quite a few that counting the variety of claims is nearly inconceivable.
These allegations embody:
It have to be famous that each one of those allegations are merely complaints sourced from a rising variety of social media posts and the corporate has denied any wrongdoing.
Its founder, Shehzan Maredia, can also be actively responding to complaints together with his personal model of occasions.
All through the previous week, folks have complained about Lava’s disturbing stage of management over its customers’ funds whereas promoting its alignment with Bitcoin values like decentralization.
In accordance with the corporate’s personal phrases of service relating to pockets performance, “The Company has no custody or control over the contents of your wallet,” but clients complained that it was transferring ostensibly self-custodial funds.
In accordance with a number of critics, customers with BTC mortgage collateral at Lava skilled a compelled migration from Bitcoin DLCs to “a more hybrid model” of asset custody.
Lava contests this characterization, claiming that the transition was a know-how swap that was repeatedly messaged prematurely.
“Users aways consented to updates,” wrote the Lava founder.
Is the rate of interest for Lava loans 5% or 13%?
On the subject of misrepresenting the efficient rate of interest of loans, Maredia tweeted that clients may entry USD utilizing BTC as collateral for mortgage charges as little as 5%.
Nonetheless, after somebody identified that the precise fee for a mortgage is likely to be as excessive as 13%, Maredia acknowledged that 5% won’t be a practical mortgage fee for each buyer.
Whereas downplaying its use of alternate blockchains, Lava founder Shehzan Maredia frequented Bitcoin podcasts and media appearances.
Certainly, he’s usually performed full-length interviews about Lava with out mentioning any blockchain besides Bitcoin — even whereas beforehand counting on alternate options like Solana and centralized stablecoins for core capabilities of its service.
Thanks, I do know it isn’t a gotcha. I simply attempt to be clear in how I discuss this stuff, as a result of there’s a lot misunderstanding round these phrases and the way they’re outlined. We have constructed a ton of bitcoin tech through the years, and we have realized that custodial/non-custodial is not…
— Shehzan (@MarediaShehzan) November 5, 2025
Most worryingly, some Bitcoin influencers have expressed considerations that Lava won’t maintain enough licenses to conduct enterprise as a cash transmitter if its actions have been, in authorized reality, cash transmission.
Alongside its denials of all the above allegations, Lava denies that it’s engaged within the enterprise of cash transmission.
In accordance with its founder, “custodial/non-custodial isn’t really a binary. It’s more of a spectrum. People talk about them in black and white terms, but it’s not that clear.”
Protos reached out to Lava for remark and can replace this story if/after we obtain a reply.
