Swiss staking platform StakeHound has accused institutional-focused infrastructure company Fireblocks of asset loss. The lawsuit was filed in Tel Aviv District Court, according to Calcalist.
Founded in 2017, Fireblocks used multi-party computation (MPC) to store private keys. For security, it forwarded backups to Coincover.
According to the complaint, as a result of negligence the defendant lost StakeHound’s private keys. Coincover employees allegedly received incorrect data — they could not verify their correctness at the initial stage due to a confidentiality agreement.
The plaintiff estimated the damages at around 38,178 ETH (~$68 million at the time of writing).
Blockchain developer Lior Yaffe, in comments to Decrypt, suggested that the cause was errors in the MPC creation process.
‘As a result, an incorrect deposit address was obtained,’ he explained.
In his view, even a backup via Coincover would not have saved it.
‘What is harder to understand is why the recovery process was not tested on a small amount before locking such an amount of ETH, or, if it had been tested earlier, what caused the later failure,’ said Yaffe.
As заявили at Fireblocks, the StakeHound project was run off-platform, and the client did not keep a backup with an external provider in accordance with the recommendations.
‘The Fireblocks team is working hard to help all parties involved in restoring access to ETH,’ the statement said.
In 2019 the company raised $16 million from venture firm Tenaya Capital, Cyberstarts and Fidelity International’s unit.
Earlier in March 2021, Fireblocks closed a $133 million funding round. The project was supported by Ribbit Capital, Galaxy Digital and Paradigm.
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