- Celsius demands liquid staking startup StakeHound to return large sums of Ether, Polkadot, and Polygon.
- After being confronted with its breach of duty, StakeHound has filed an arbitration agreement against Celsius to seek declaratory relief in Switzerland.
- Celsius has reacted to StakeHound’s arbitration filing, noting that it violates Section 362 of the United States Bankruptcy Code.
Celsius, a bankrupt crypto lender, is suing StakeHound, claiming the company failed to return $150 million worth of cryptocurrency assets amid Celsius’ bankruptcy proceedings.
Celsius Takes Legal Action Against StakeHound
In a recent court filing by Celsius, StakeHound, the pioneering tokenized staking platform, has been embroiled in a lawsuit by the lending platform.
The legal dispute centres around StakeHound’s alleged failure to return $150 million, including 40 million Polygon (MATIC), 66,000 Polkadot (DOT), 25,000 staked native Ether, and 35,000 Ether (ETH) owned by Celsius.
Additionally, a court docket filed in a U.S. Bankruptcy Court for the Southern District of New York alleges that StakeHound filed an arbitration agreement against Celsius to seek declaratory relief in Switzerland. This comes after StakeHound was confronted about its breach of duty to the bankrupt crypto lender.
In the Switzerland filing, StakeHound argued that it has “no obligation” to exchange the “stTokens” for other tokens. Notably, the platform noted that it lost the keys associated with 35,000 Celsius ETH and is relieved of its obligation to return these tokens.
StakeHound said:
“Because keys associated with the 35,000 Celsius ETH (plus Rewards) allegedly had been misplaced, StakeHound not only was relieved of its obligation to return those tokens, StakeHound also was no longer required to return the 25,000 Celsius ETH (plus Rewards) in their entirety.
However, Celsius has reacted to StakeHound’s arbitration filing, noting that it violates Section 362 of the United States Bankruptcy Code as per the filing. This section is known as the “automatic stay,” which prevents most creditors from initiating debt collection or legal action against an entity that has filed for bankruptcy.
“StakeHound should be required to turn over Celsius’ property immediately, pay compensatory damages arising from its breaches of contractual and other duties, and damages, sanctions, and attorneys’ fees associated with StakeHound’s willful misconduct, and should be temporarily and permanently enjoined from continuing its arbitration against Celsius in violation of the automatic stay.”
StakeHound Vs Fireblocks
In 2021, StakeHound blamed its custody provider – Fireblocks – the leading institutional crypto services provider, for losing $75 million worth of Ether. This led to the Israel- based platform being sued for negligence.
In 2022, reports indicated that Celsius lost 35,000 ETH when StakeHound misplaced its private keys for around 38,000 ETH. StakeHound blamed their custody provider, Fireblocks, for the loss. The firm argues that it has been relieved of its obligation to pay back these assets.
However, Celsius believes StakeHound’s failure to return the ETH staked in February 2021 to the lender represents a “clear breach of its duties,” irrespective of whether Fireblocks had “substantial liability” associated with the key incident.
Reportedly, Fireblock’s CEO, Michael Shaulov, denied the allegations and said that the lawsuit results from StakeHound “being stressed and trying to throw the blame on someone who has a bigger balance sheet.”
