Bankrupt crypto lender Celsius is suing Switzerland-based liquid staking platform StakeHound for allegedly failing to return $150 million worth of crypto assets in Ether (ETH), Polygon (MATIC), Polkadot (DOT), and other tokens.
Celsius claimed that it entrusted StakeHound with 40 million native MATIC tokens (worth approximately over $30 million at recent prices) and 66,000 DOT tokens (worth more than $300,000 at recent prices) for staking in April 2021 for the staking platform’s liquid staking “stTokens.”
In a new filing with the US Bankruptcy Court for the Southern District of New York on Tuesday, Celsius further accused StakeHound of “wrongfully” withholding or otherwise “depriving” the crypto lender of possession of all of these valuable assets.
Besides failing to turn over certain tokens, StakeHound allegedly filed an arbitration agreement against Celsius to seek declaratory relief in Switzerland after it was confronted about its breaches of duty to the bankrupt crypto lender.
In the Switzerland filing, StakeHound is alleged to have argued that it has “no obligation” to exchange the stTokens for other tokens and added that it had “misplaced” keys associated with “$70 million worth of native ETH.”
The commencement of arbitration violates Section 362 of the United States Bankruptcy Code, Celsius said in its court filing. Despite reminding StakeHound that the arbitration violated the “automatic stay” rule and demanded its withdrawal, the platform ignored Celsius’ demand entirely.
“StakeHound should be required to immediately turn over Celsius’ property, 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 previously blamed its custody provider – Fireblocks – the leading institutional crypto services provider, for losing $75 million worth of Ether. The Israel-based company was then sued for negligence.
But 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 the fact whether Fireblocks had “substantial liability” associated with the key incident.
Fireblocks CEO Michael Shaulov previously denied any wrongdoing and said the lawsuit is a result of StakeHound “being stressed and basically trying to throw the blame on someone who has a bigger balance sheet.”
