Celsius Files Lawsuit Against StakeHound to Recover $150 Million

Jimmy Aki
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Bankrupt crypto lender Celsius took legal action against StakeHound over its alleged failure to return $150 million worth of $MATIC, $DOT, $ETH, and other tokens.

Celsius Sues StakeHound to Recover Funds

Celsius Network has filed a lawsuit against StakeHound, accusing the liquid staking platform of failing to return $150 million worth of tokens.

In the court document, the crypto lending firm stated that the tokens held significant value and quantity.

In January 2021, the platform handed over approximately 25,000 staked native $ETH to StakeHound. 

Based on recent prices and rewards, this is valued at over $50 million.

StakeHound also staked around 35,000 native $ETH in February 2021, which was also accompanied by rewards at a value exceeding $70 million at recent prices.

Additionally, in April 2021, Celsius entrusted StakeHound with 40 million native $MATIC tokens (worth approximately $30 million) and 66,000 $DOT tokens (worth more than $300,000) for staking purposes.

The staked native $ETH tokens were locked and inaccessible for withdrawal until the Ethereum blockchain’s anticipated “Upgrade” occurred around April 12, 2023.

StakeHound offers liquidity to customers who have staked native tokens.

Staked native tokens can generate significant interest and other rewards.

However, it cannot be utilized for other decentralized finance investments or other purposes as long as they remain staked.

These staked native tokens are meant to be deployable in other investments and can be presented to StakeHound when customers request the return of their rewards.

However, despite repeated demands, StakeHound has failed to return or provide Celsius with substantial native tokens in exchange for liquid staking tokens “stTokens.” 

StakeHound’s actions have violated contractual obligations and other duties. 

These include a willful violation of the automatic stay when confronted with these breaches.

StakeHold Argues Against Returning Assets

As the industry continues to evolve and attract greater mainstream adoption, issues surrounding security, transparency, and trust become crucial factors for the sustainability of these platforms.

StakeHound, on the other hand, has refuted Celsius Network’s allegations. 

It stated that the failure to distribute staking rewards was due to external factors beyond its control. 

Recall that Celsius cautioned StakeHound in October 2022 to be watchful for any attempts by Jason Stone, the former U.S.-based CEO of Celsius KeyFi. 

Later, Celsius sought assurance from StakeHound that the native $ETH would be safeguarded and transferred back to Celsius’ accounts in exchange for stTokens once the native ETH was unlocked. 

However, StakeHound claimed it was relieved of the obligation to return those tokens and exempted from returning the entire 25,000 Celsius ETH (plus Rewards). 

Celsius promptly clarified StakeHound’s misunderstanding and offered to discuss a resolution. 

The crypto lending network aims to solve the disputes if StakeHound takes reasonable measures to ensure the security and availability of the native $ETH for potential future resolutions. 

However, StakeHound ignored Celsius’ proposal. StakeHound initiated arbitration proceedings against Celsius in Switzerland on April 24, 2023.

The filing sought declaratory relief despite being aware of the ongoing bankruptcy cases. 

However, Celsius claims that the arbitration filing violates Section 362 of the United States Bankruptcy Code. 

This is also known as the “automatic stay” and prohibits most creditors from collecting debts or taking legal action against a person or company once they file for bankruptcy.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.