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Celsius, the bankrupt crypto lender, filed a lawsuit against StakeHound for allegedly withholding $150 million worth of tokens including ETH, MATIC, and DOT.
Court filings revealed that Celsius had entrusted 40 million MATIC, 66,000 DOT, 25k stETH, and 35k ETH for Stakehound’s liquid staking tokens – stTokens – back in 2021.
However, the filings revealed that Stakehound had hit back with an arbitration proceeding in Switzerland seeking declaratory relief that states it is under no obligation to exchange stTokens for other tokens as it has misplaced the keys.
[DB] Celsius Lost 35,000 ETH When Stakehound "Misplaced" Private Keys
— db (@tier10k) July 14, 2022
Celsius Claims StakeHound Wrongfully Withholding Native Tokens
The court documents outlined Celsius’s claim that Stakehound has “wrongfully” withheld the possession of these native tokens, depriving the now-defunct crypto lending company of assets.
They also detail how Celsius warned Stakehound to block any attempt made by Jason Stone, the CEO of US-based Celsius KeyFi, to seize ETH tokens that belong to Celsius. Stakehound then informed Celsius that it was making necessary preparations to safeguard and turnover the assets back to Celsius’ Estate in return for stToken after ETH unlocked.
Celsius also demanded that Stakehound must return the native tokens it is owed and pay for damages, attorney fees, and also pre and post-judgment interest that has arisen due to Stakehound’s “breach of duties.” The now-defunct crypto lending firm is also asking the Switzerland court to stall any further attempts by Stakehound to file for arbitration.
Simply put, Celsius wants to implement “automatic stay”, a rule designed to stop credits from collecting debts or taking legal action on an entity while it is going through bankruptcy proceedings.
Stakehound Blames Fireblocks for the Loss
Stakehound has blamed Fireblocks for the losses. Fireblock, a blockchain security service providing company, was sued by Stakehound in 2021 due to Stakehound’s claim that the company is responsible for the loss of $70 million in Ethereum.
According to the claim, it was due to one of the Fireblocks employee’s negligence that Stakehound lost over 38,178. Fireblock has responded that it is under “no obligation” to store backup BLS keys for Stakehound.
To that, Celsius has said that the Fireblocks issue doesn’t relieve Stakehound from returning the holdings.
Celsius Earn Program Assets
The bankruptcy court presiding over Celsius’ Chapter 11 bankruptcy case concluded in January that a significant portion of customer assets held by Celsius belongs to the Celsius Estate.
These assets were part of the Celsius’s Earn program, an interest account program that offered regular percentage returns to users for holding their assets.
The court concluded that the digital assets were not in Celsius’ custody but were, in fact, used by Celsius to generate investment returns.
We have become aware of phishing attempts being made through email purporting to be from Celsius. Please do not click any suspicious links. Additional information on these phishing attempts is available at Docket No. 2896 which is available on Stretto https://t.co/404lY08bQV
— Celsius (@CelsiusNetwork) June 27, 2023
Meanwhile, there has been a slew of phishing attempts by many claiming to be Celsius amidst the current bankruptcy proceedings. Celsius’s official Twitter account is actively engaging with the community to keep it informed.
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