StakeHound Sues Crypto Custodian Fireblocks For 'Losing $70M ETH,' Report Says

Cryptocurrency staking platform StakeHound has filed a lawsuit against crypto custodian Fireblocks, alleging that the latter was responsible for losing $75 million worth of Ethereum ETH/USD.

What Happened: According to documents obtained by Calcalist, the suit filed at the Tel Aviv District Court claims that a Fireblocks employee did not back up the private keys to a digital wallet, which was later deleted, resulting in the assets being lost.

"This is a human error committed by an employee of the defendants, who worked in an unsuitable work environment, did not protect or back up the defendant’s private keys needed to open the relevant digital wallet, and for no apparent reason, the keys were deleted, preventing the plaintiff’s digital assets from being accessed,” stated the complaint.

Fireblocks went on record to deny any negligence on its part, saying that there were “factual issues” with StakeHound’s lawsuit.

“I assume this is as a result of them being stressed and basically trying to throw the blame on someone who has a bigger balance sheet,” said Fireblocks CEO Michael Shaulov to Forbes.

StakeHound claims that "this is not a simple situation where the private keys were simply lost, rather, the defendants did not transfer the relevant private keys to Coincover as required and agreed upon.”

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However, Shaulov said that StakeHound never told Fireblocks to send their half of the BLS (Boneh–Lynn–​Shacham) key to Coincover or utilized a built-in tool to verify that backup was successful.

Earlier this year, Fireblocks raised $133 million in Series C funding, with strategic investment from Bank of New York Mellon BK.

The company is one of the largest crypto custody providers for several institutions, including Facebook, Inc (NASDAQ: FB), which is expected to launch its cryptocurrency Diem later this year.