Celsius Network, a crypto lending platform that filed for bankruptcy last year, has sued StakeHound, a liquid staking service, for allegedly failing to return $150 million worth of tokens that Celsius deposited with StakeHound.
According to a court document, Celsius placed 40 million Polygon (MATIC), 66,000 Polkadot (DOT), 25,000 staked native Ether, and 35,000 Ether (ETH) with StakeHound in exchange for “stTokens” that represented the staked assets. Celsius claimed that it could redeem the stTokens for the original tokens at any time, but StakeHound refused to honor this agreement and demanded arbitration.
Celsius Network Stands Its Ground Against StakeHound
The company argued that StakeHound’s arbitration filing violated the “automatic stay” rule, which prevents creditors from pursuing legal action against a debtor who has filed for bankruptcy. Celsius also accused StakeHound of breaching its contractual duties and causing damages to Celsius by losing the private keys to 35,000 ETH that were part of the deal.
StakeHound has not publicly responded to the lawsuit, but it has previously stated that it was relieved of its obligation to return the lost ETH due to a force majeure clause in its terms and conditions. StakeHound also claimed that it had offered Celsius a compensation plan that included a share of its future profits and governance tokens.
The lawsuit is the latest twist in the saga of Celsius Network, which has been struggling to restructure its business since it declared bankruptcy in 2022.
The company blamed its financial woes on a series of bad investments, regulatory issues, and cyberattacks. Celsius recently proposed a restructuring plan that would create a public platform owned by its users and sponsored by a digital asset investment firm called NovaWulf.
The case also highlights the risks and challenges of liquid staking, a new trend in the crypto space that allows users to earn rewards from staking their tokens without locking them up.
Liquid staking platforms like StakeHound issue synthetic tokens that represent the staked assets and can be traded or used in other protocols. However, this also introduces new layers of complexity and trust, as users have to rely on third parties to secure and manage their tokens.
