StakeHound claimed in the filing that it is under “no obligation” to exchange the stTokens for other tokens.
Bankrupt crypto lender Celsius Network has filed a lawsuit against liquid staking platform StakeHound, accusing the platform of failing to return approximately $150 million worth of tokens. The tokens in question include popular cryptocurrencies such as Ethereum (ETH), Polygon (MATIC), and Polkadot (DOT) amongst others.
In a recent court filing, it has been revealed that Celsius had entrusted StakeHound with a substantial amount of tokens in 2021. The filings stated that Celsius exchanged these tokens, which were valued at over $150 million, for StakeHound’s liquid staking “stTokens”.
The specific breakdown of the tokens entrusted to StakeHound includes 25,000 staked native ETH, 35,000 native ETH, 40 million MATIC, and 66,000 DOT. Accordingly, Celsius is seeking legal recourse with specific demands from StakeHound, as indicated in the court filings.
Celsius stated that StakeHound should be compelled to return the tokens that are currently within its possession or control, either in their original form or through an exchange of the stTokens that were received in return. Celsius also seeks compensation for damages resulting from StakeHound’s alleged breaches of duty and willful misconduct, including actual and exemplary damages, legal fees, and pre-and post-judgment interest.
Furthermore, Celsius is seeking an injunction against StakeHound to prevent it from pursuing arbitration against Celsius in violation of the automatic stay. This implies that Celsius believes StakeHound’s activities in pursuing arbitration throughout the bankruptcy process violate established legal norms.
These demands made by Celsius Network highlight the seriousness of the alleged misconduct on the part of StakeHound. Celsius aims to recover the tokens entrusted to StakeHound and seek appropriate compensation for losses incurred. The request for an injunction serves to prevent further complications and protect Celsius’ rights during the ongoing legal proceedings.
The StakeHound Arbitration Filing Against Celsius
Meanwhile, court filings lodged with the US Bankruptcy Court for the Southern District of New York allege that StakeHound has submitted an arbitration agreement against Celsius in Switzerland following the crypto lender’s bankruptcy filing.
StakeHound claimed in the Switzerland filing that it is under “no obligation” to exchange the stTokens for other tokens. StakeHound also claims it misplaced the keys to 35,000 Celsius ETH and is no longer obligated to restore these tokens.
StakeHound blamed the loss on Fireblocks, a third-party security service. While Fireblocks may have significant accountability for the key incident, StakeHound’s failure to release the staked ETH to Celsius, regardless of the justification, is deemed a clear breach of StakeHound’s duty to Celsius.
Accordingly, Celsius reminded StakeHound on May 1, 2023, that the arbitration had broken the automatic stay and demanded its withdrawal. StakeHound completely rejected this Celsius’ May 1, 2023 demand.
As the case unfolds, it will be up to the court to determine the validity of Celsius’ claims and whether StakeHound should be held accountable for the alleged breaches of duty and willful misconduct. The court’s decision will have significant implications for both parties involved and may set a precedent for similar disputes in the crypto industry.