- Swiss DeFi project StakeHound is suing crypto custodians Fireblocks over $75 million in lost ETH
- StakeHound claims Fireblocks did not backup an Ethereum wallet private key, causing them to lose 38,178 ETH
- Fireblocks argues that the private key creation was done by StakeHound and they were responsible for backup
Israeli cryptocurrency custodian Fireblocks is being sued by one of its clients over approximately $75 million in ETH that was lost when the private keys to the wallet were not properly backed up. DeFi project StakeHound blames human error for the improper storage of the private key, but Fireblocks insists that StakeHound is at fault for not following their guidelines in creating the wallet.
Ethereum 2.0 Staking Wallet Keys Lost
The issue is centered around Ethereum 2.0 staking, the wallets for which have not yet been developed. However, StakeHound wanted to press ahead with a form of early staking for its clients and enlisted Fireblocks’ help.
This resulted in Fireblocks needing to create software outside its usual parameters, and it is the private key associated with these new wallets that have caused the loss, with StakeHound believing that the private key should have been sent to CoinCover, who would custody the private key.
Fireblocks Blames StakeHound for Improper Backup
StakeHound claims that Fireblocks “did not transfer the relevant private keys to Coincover as required and agreed upon” which meant that Fireblocks “irrevocably lost access to the plaintiff’s digital assets…causing the loss of 38,178 of the plaintiff’s ETH coins.” Fireblocks however claims that “the entire sequence of events described is detached from reality, and if there was negligence it was from the plaintiff’s side.”
This negligence, Fireblocks says, was due to the fact that the password generation took place on the client side rather than on their side as is usually the case, and as such StakeHound was responsible for sending the private key to CoinCover. Fireblocks claims that it gave StakeHound instructions to follow to secure the private key, but StakeHound failed to follow them and is now suing out of desperation.
The case has been filed with the Tel Aviv District Court and we will report any updates.
