Bankrupt crypto lender Celsius has commenced legal action against Stakehound for failing to pay back $150 million in digital assets, including staked Ethereum (ETH), Polkadot (DOT), and Polygon’s MATIC, which it entrusted to the staking platform in 2021, according to a July 11 court filing.
“StakeHound continues to wrongfully withhold or otherwise deprive Celsius of possession of all of these valuable Native Tokens.’
Celsius alleged that StakeHound refused to return the entrusted funds when it went bankrupt last year, adding that the staking platform filed an arbitration agreement against it in Switzerland, saying it had no obligation to return the fund.
Celsius alleges StakeHound lost keys to 35k ETH.
According to the court filing, the staking platform claimed it lost the keys to Celsius 35,000 ETH in 2021, which means it has no obligation to repay. At the time, StakeHound blamed Fireblocks for losing the keys and sued the custodian.
Celsius argued that the arbitration violates U.S. Bankruptcy Code, where section 362 prevents a creditor from taking any legal action or collecting debt against anyone that filed for bankruptcy.
The bankrupt firm wants the court to compel StakeHound to return the funds and pay damages for breach of contract.
“StakeHound should be required to turn over to Celsius the tokens in its actual or constructive possession or otherwise provide the Native Tokens in exchange of the stTokens, and pay actual and exemplary damages, attorneys’ fees, and pre- and post-judgment interest arising from its breaches of duty and willful misconduct, and should be enjoined from continuing to pursue arbitration against Celsius in violation of the automatic stay.”
StakeHound had yet to file a defense for the allegations against it as of press time.
Celsius’s bankruptcy efforts
Meanwhile, the lawsuit marks Celsius’s latest efforts to recover some funds stuck across other platforms. Since filing for bankruptcy, the bankrupt lender has devised plans to make its creditors whole.
Recently, the lender got the court’s approval to liquidate its altcoins for Bitcoin (BTC) and ETH. However, a Kaiko report stated that the lender’s liquidation process might exert more pressure on the crypto market.
According to Arkham Intelligence data, Celsius currently holds $598.67 million in digital assets, with its CEL native token accounting for about $100 million of this fund.
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