Celsius Files Lawsuit against StakeHound
Bankrupt crypto lender Celsius Network has filed a lawsuit against liquid staking platform StakeHound after the company allegedly failed to return $150 million worth of tokens owned by Celsius.
The Trade-Off: Crypto Tokens for stTokens
According to a court document filed by Celsius, the company placed 40 million Polygon (MATIC), 66,000 Polkadot (DOT), 25,000 staked Ether (stETH) and 35,000 Ether (ETH) with StakeHound. Celsius highlighted that these tokens are worth a total of $150 million. In exchange for the tokens, Celsius received “stTokens,” which they could deploy on other investments or return to StakeHound to get their crypto back.
Violation of the US Bankruptcy Code Section 362
However, the recent filing alleged that StakeHound demanded arbitration against Celsius and argued that it “has no obligation” to exchange native ETH for the stTokens after it was confronted by its breaches of duty to Celsius. Celsius argues that this move by StakeHound violates section 362 of the United States Bankruptcy Code, also known as the automatic stay rule. This rule disallows creditors from taking legal action against or collecting debt from a company or person as soon as they file for bankruptcy.
StakeHound’s Argument: Relieved of the Obligation
In 2022, it was reported that Celsius lost 35,000 ETH when StakeHound lost private keys for a total of around 38,000 ETH. StakeHound claims that this event has relieved it of its obligation to pay back these assets.
Celsius Network’s Restructuring Plans
Since its bankruptcy filing almost a year ago, Celsius has been trying to make an effort to restructure. On Feb. 15, Celsius presented a restructuring plan that pushes for creating a public platform owned by Earn creators, which will be sponsored by digital asset investment firm NovaWulf. The legal actions with StakeHound may significantly affect these plans.
Conclusion: A Defining Moment for Crypto Lending
This legal confrontation between Celsius and StakeHound emphasizes the challenges that come with the evolving legal landscape of the cryptocurrency lending industry. The outcome of the lawsuit could set a precedent for how such disputes are handled in the future, potentially defining the responsibilities and obligations of parties in similar scenarios.
Moreover, this case could influence how cryptocurrency platforms consider and manage their risks, particularly those related to private key management. As Celsius’ restructuring plans hinge on the resolution of this legal dispute, all eyes will be on the court’s decision, which may not only dictate the fate of these two companies but also impact the wider cryptocurrency lending space.
