The crypto community has been a hotbed of controversy recently with Celsius, a bankrupt crypto lender, filing a lawsuit against liquid staking platform, StakeHound. The dispute revolves around StakeHound’s alleged failure to return tokens valued at over $150 million. These tokens encompassed an amalgamation of ether (ETH), Polygon’s MATIC, Polkadot’s DOT, among others that Celsius had entrusted to StakeHound in 2021.
Interestingly, Celsius swapped these tokens for StakeHound’s proprietary liquid staking “stTokens”. But when Celsius called an end to the party file for bankruptcy, matters got complicated. Notably, StakeHound counterattacked by filing an arbitration agreement in Switzerland, post-Celsius’s bankruptcy.
Now, the crux of StakeHound’s argument lies in their claimed “no obligation” to exchange the stTokens for other tokens and the mysterious loss of keys to 35,000 Celsius ETH. Consequently, StakeHound boldly proclaimed that it is absolved of any responsibility to return these tokens. Celsius, however, asserts that the arbitration filing infringes on Section 362 of the U.S. Bankruptcy Code, synonymous with the “automatic stay” rule.
This rule, in essence, halts most creditors from attempting to collect debts or take legal action against any person or company as soon as they seek bankruptcy. Celsius’s belief is that the regulations apply, and StakeHound’s countermove breaches this standard.
Adding fuel to the fire, StakeHound attributed the key loss to Fireblocks, an alleged custodian, sparking off yet another series of legal wrangles in 2021. Despite this blame game, Celsius is of the viewpoint that StakeHound’s liaison with Fireblocks bears no weight on StakeHound’s commitment to repay the stowed away tokens.
It becomes evident that even amidst regulatory frameworks, such as Section 362 of the U.S. Bankruptcy Code, the world of crypto can be a tricky terrain to navigate. An even more concerning facet of this circumstance is that Celsius opted not to inform its customers about this loss in a timely fashion.
While it might seem sensible to take an ‘each man for himself’ stance in legal battles, it is vital to remember that, in crypto-sphere, the actions of one link in the blockchain can have significant implications on all other segments, especially where customer trust is concerned. It would serve the community well to bear in mind that transparency and adherence to the standard protocols are crucial to the industry’s sustained growth and credibility.
Source: Coindesk
