In a recent development, cryptocurrency lender Celsius Network has initiated legal action against liquid staking platform StakeHound for allegedly failing to return $150 million worth of tokens that belong to Celsius. The lawsuit, filed by Celsius, claims that StakeHound owes them 40 million Polygon (MATIC), 66,000 Polkadot (DOT), 25,000 staked native Ether, and 35,000 Ether (ETH). These tokens hold significant value in the crypto market.
Celsius had initially exchanged their tokens for “stTokens” provided by StakeHound, which could be utilized for other investments or returned to retrieve the original crypto assets. However, according to the filing, StakeHound refused to honor the exchange of native ETH for the stTokens after facing allegations of breaching its obligations to Celsius. In response, Celsius argues that StakeHound’s demand for arbitration violates the United States Bankruptcy Code’s “automatic stay” rule, which prohibits creditors from taking legal action or collecting debts from a company when it files for bankruptcy.
Celsius is seeking the return of its assets and compensation for damages resulting from StakeHound’s contractual breaches. The bankruptcy filing by Celsius almost a year ago prompted the company to explore restructuring options. On February 15, Celsius proposed a plan to create a publicly owned platform sponsored by digital asset investment firm NovaWulf, with the goal of revitalizing its operations.
It is worth noting that last year, Celsius reportedly lost 35,000 ETH when StakeHound misplaced the private keys associated with approximately 38,000 ETH. As a result, Celsius contends that it is no longer obligated to repay these assets.
Both Celsius Network and StakeHound have been approached for comment, but they have yet to respond to inquiries regarding the lawsuit. This legal dispute highlights the challenges and risks involved in the cryptocurrency market, particularly regarding custody and security of digital assets.
As Celsius continues its efforts to recover the substantial amount owed to them, the outcome of this lawsuit will have implications for the wider crypto industry, shedding light on the importance of trust, transparency, and accountability within the ecosystem.