Celsius sues StakeHound to recoup $150M MATIC, ETH and DOT

Bankrupt lender Celsius is demanding liquid staking startup StakeHound return large sums of ether, polkadot and polygon

July 12, 2023 12:59 pm

Celsius’ Alex Mashinsky | Kevin McGovern/Shutterstock.com modified by Blockworks

Celsius is suing StakeHound to recover $150 million in ether (ETH), polygon (MATIC) and polkadot (DOT).

The lender, which declared bankruptcy in July last year, claims StakeHound was entrusted with 25,000 native ETH ($47 million) in January 2021, and 35,000 native ETH ($65.9 million) in February of that same year.

However, StakeHound’s third-party security provider allegedly lost the private keys associated with the 35,000 native ETH from February.

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StakeHound allegedly claimed that “because keys associated with the 35,000 Celsius ETH (plus Rewards) had been misplaced, StakeHound not only was relieved of its obligation to return those tokens, StakeHound also was no longer required to return the 25,000 Celsius ETH (plus Rewards) in their entirety.”

Two years earlier, Celsius entrusted StakeHound with 40 million MATIC ($29.1 million) as well 66,000 DOT ($342,000). StakeHound, in return, issued customers “stTokens.”

In their recent filing, Celsius lawyers maintain the tokens were only locked until the Shapella fork activated ETH withdrawals earlier this year. “The staked native ETH tokens were locked and unavailable for withdrawal by anyone until the occurrence of a long-awaited ‘upgrade’ to the Ethereum blockchain, an event which happened on or around April 12, 2023.”

As for the MATIC and DOT, Celsius allegedly demanded StakeHound return the native tokens in May of this year “in exchange for the corresponding stTokens issued by StakeHound. However, StakeHound never responded to the letter and the tokens that it failed to return are now ‘worth at least in excess of $150 million.'”

“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 wilful misconduct,” the lawsuit said.

In late June, Celsius received court approval to convert tokens to BTC and ETH, with plans to make customers whole following a year of bankruptcy proceedings.

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