Bankrupt Celsius Pursues StakeHound to Return Cryptos Valued at $150M
The embattled crypto lending firm Celsius filed a complaint alleging StakeHound refused to return $150 million tokens. The crypto lender reveals that it entrusted the liquid staking platform with Ethereum, Polkadot, and Polygon tokens.
Celsius Pursuing StakeHound for Failing to Return Million-dollar Cryptos
The Tuesday, July 11 filing reveals that StakeHound SA held the largest stockpile of Celsius Network’s Ethereum. The adversary complaint reveals that StakeHound contravened the bankruptcy provisions by initiating the arbitration proceeding against Celsius in Switzerland. Celsius considers the move to seek declaratory relief a breach since StakeHound was privy to the ongoing bankruptcy cases.
Besides leveling claims alleging contract breach and willful misconduct, the filing petitions the court to order StakeHound to return the property it owes Celsius. Also, it seeks payment of compensatory damages and costs incurred in procuring the attorney to pursue the property.
The complaint targets the return of three tokens: Ethereum, Polkadot, and Polygon. Celsius is pursuing Ethereum, valued at $120 million, Polkadot at $300,000, and Polygon, worth $30 million, estimated using the current prices.
StakeHound Unique Services Yield Fresh Legal Battle Reignited in During the Celsius Networks Bankruptcy Proceeding
The complaint lodged in the ongoing bankruptcy proceeding indicates that StakeHound terminated the staking activities in mid-2021. The liquid staking platform would grant liquidity to parties desiring to stake their crypto. The process involves pledging tokens to a network and reap rewards in return. It offered liquidity by wrapping assets to yield staked tokens representing the underlying crypto on a matching basis.
Clients could receive stTokens for the locked-up assets they could present to StateHound when claiming their tokens. Celsius Networks, through its Tuesday filing, alleges that StateHound turned down a request to return the assets for the stTokens.
StakeHound Accused of Depriving of Celsius Invaluable Tokens
The attorneys submit that StakeHound is continually withholding and depriving the plaintiff of possession of the valuable native tokens. The attorneys revisit October 23, 2022, notice warning StakeHound to exercise vigilance against attempts to seize the ETH upon the upgrade. Celsius warned StakeHound to thwart efforts by Jason Stone, identified as ex-chief at Celsius KeyFi, from accessing the unlocked ETH.
Celsius would later seek confirmation that StakeHound made requisite preparation to protect and return the native ETH to the lender’s estates following the upgrade in exchange for stTokens.
The filing cites StakeHound counter blaming Celsius for losing the keys linked with the 35000 ETH tokens, hence the failure to return them.
StakeHound Attributes Refusal to Return Celsius ETH to Misplaced Keys
StakeHound dismissed Celsius Networks’ claim citing the misplacement of the keys connected with the 35,000 ETH and rewards. The misplacement of the keys relieved StakeHound’s obligation to return the 25,000 Celsius ETH and accruing rewards. The incident gained publicity in June 2021, when StakeHound accused custody firm Fireblocks acted negligently.
StakeHound initiated action in April 2023 before a Swiss court that it found no obligation to swap Ethereum with the stTokens initially issued to the bankrupt Celsius.
Attorneys representing Celsius decry that the arbitration process initiated by StateHound contravenes US Bankruptcy Code s362. The section stipulates an automatic stay, thereby preventing creditors and other parties from pursuing obligations and initiating legal actions against the company that has already filed for bankruptcy protection.
Through its lawyers, Celsius submitted that it constituted the largest customer for StakeHound. The attorneys argue that the Celsius business with the StakeHound accounted for over 90% of all tokens under the platform.
The Ethereum pursued by Celsius Networks was locked in anticipation of the hyped blockchain upgrade. The upgrade occurred in April 2023, allowing the holders to unlock a huge pool of staked Ether (ETH).
By the time of the Tuesday filing, StakeHound is yet to confirm whether the assets claimed by Celsius were unlocked following the upgrade completion.
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