Celsius Sues Liquid Staking Platform Over Failure To Return $150M Entrusted Fund

The prominent cryptocurrency lending platform, Celsius, has filed a lawsuit against StakeHound for allegedly failing to return approximately $150 million worth of tokens.

The legal dispute stems from a partnership between the two companies that aimed to offer yield-generating services to crypto investors. According to Celsius, StakeHound was entrusted with holding the tokens as part of their agreement but failed to fulfill their obligations.

Court Filings Show That Celsius Entrusted StakeHound With Crypto Tokens Valued $150 Million

In a recent court filing with the US Bankruptcy Court for the Southern District of New York on July 11, Celsius accused StakeHound of depriving them of possession of their assets staked on StakeHound.

According to the court filing, Celsius alleges they staked huge quantities of crypto assets such as 40M MTAIC tokens, 66 million DOT, 35,000 native ETH, and 25,000 staked native ETH.

The legal documents revealed that Celsius swapped the tokens, which had a valuation exceeding $150 million, for StakeHound's stTokens" as part of their transaction.

In addition to not returning specific tokens, StakeHound reportedly initiated an arbitration agreement against Celsius in Switzerland, seeking legal clarification in response to allegations of breaching its responsibilities towards the insolvent cryptocurrency lender.

The filing in Switzerland claims that StakeHound argued it is not obliged to exchange the stTokens for different tokens and admitted to having misplaced the keys linked to approximately $70 million worth of native ETH."

In response, Celsius argued that the filing of arbitration violates Section 362 of the United States Bankruptcy Code, commonly called the automatic stay.

Section 362 of the U.S. Bankruptcy Code is a provision designed to halt most creditors from pursuing debt collection or initiating legal proceedings against an individual or entity immediately upon filing for bankruptcy.

Celsius Unfazed by Fireblocks-StakeHound Partnership, Maintains Confidence

StakeHound had previously attributed the loss of $75 million worth of Ether to its custody provider, Fireblocks, a prominent institutional crypto services provider, and faced a lawsuit for negligence.

According to Calcalist, the StakeHound's filing said this is a human error committed by an employee of the defendants, who worked in an unsuitable work environment.

However, Celsius maintains that StakeHound's inability to return the ETH staked in February 2021 to the lender constitutes a definite violation of its obligations," regardless of the extent of liability that Fireblocks may bear for the incident involving the keys.

Fireblocks CEO Michael Shaulov previously refuted any misconduct allegations and asserted that the lawsuit against them was a consequence of StakeHound.

He asserted that the lawsuit was due to StakeHound's elevated stress levels, attempting to shift the responsibility onto a party with greater financial resources.

Importantly, StakeHound was building a Bonen-Lynn-Shacham (BLS) solution with support from Fireblock's multi-party computation (MPC) framework.

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