Bankrupt crypto lender Celsius Network has recently taken legal action against liquid staking platform StakeHound, alleging that the platform failed to return $150 million worth of tokens owned by Celsius.
Quick facts:
- Celsius Network files lawsuit against StakeHound, demanding the return of $150 million worth of tokens.
- StakeHound was accused of failing to fulfill obligations and violating bankruptcy rules in the dispute with Celsius Network.
- The legal battle intensifies as Celsius Network seeks compensation for damages and the return of its property from StakeHound.
The lawsuit, which Celsius filed, highlights the disagreement between the two businesses regarding the exchange of tokens and the alleged breach of contractual obligations.
Bankrupt Celsius Demands Token Return
As per the court filing, Celsius Network relied on StakeHound to hold various tokens, including 25,000 staked Ethereum (ETH), 35,000 native ETH, 40 million Polygon (MATIC), and 66,000 Polkadot (DOT) tokens in 2021.
These tokens had a total value of $150 million. In return, StakeHound issued “stTokens” to Celsius, which could be used for other investment purposes or exchanged for the original tokens.
Celsius Network’s legal action alleges that StakeHound violated bankruptcy rules by initiating arbitration proceedings against Celsius in Switzerland. In the arbitration filing, StakeHound claimed that it is not obligated to exchange the stTokens for other tokens.
The filing also mentioned that StakeHound lost the keys for 35,000 ETH tokens in 2021, which StakeHound argues relieves them of the obligation to return these tokens. StakeHound attributed the loss to Fireblocks and initiated legal action against the custody.
Despite blaming Fireblocks for the loss, StakeHound’s accusations against the custody provider do not excuse its obligations to return the tokens to Celsius, according to the complaint filed by Celsius.
Celsius Network Seeks Compensation for Damages and Return of its Property
Celsius contends that StakeHound’s arbitration filing goes against Section 362 of the United States Bankruptcy Code, known as the “automatic stay” rule. This rule prohibits creditors from taking legal action or pursuing debts from a company that has filed for bankruptcy.
In its lawsuit, Celsius Network is pursuing multiple remedies. Firstly, they are demanding the prompt return of their property, which includes the tokens that were entrusted to StakeHound.
Secondly, they are seeking compensation for damages arising from the alleged breaches of contractual obligations by StakeHound. Lastly, Celsius expects StakeHound to bear the attorneys’ fees incurred during the course of the lawsuit.
Related: Celsius Creditors File Amendment, Claims Executives Engaged in Wash Trading
Celsius Network filed for bankruptcy almost a year ago and has been working on a restructuring plan. Celsius presented a restructuring plan in February 2023 with the intention of developing a public platform for Earn creators.
The digital asset investment firm NovaWulf would sponsor this platform. The restructuring plan is part of Celsius’ efforts to recover from bankruptcy and address the financial challenges it faces.
