Celsius Bankruptcy: Fireblocks Accused of Destroying Crypto Keys
On Thursday, March 12, 2026, Law360 reported that the Chapter 11 plan administrator for Celsius Network, the now-defunct cryptocurrency platform, is pressing a New York bankruptcy court to compel Fireblocks to respond to discovery demands. The administrator alleges “staggering negligence” on the part of the cybersecurity company led to the destruction of cryptographic keys, resulting in the loss of Ethereum tokens valued at tens of millions of dollars.
In a 14-page motion, the litigation administrator and asset recovery manager requested U.S. Bankruptcy Judge Martin Glenn to order Fireblocks Inc., based in New York, to comply with subpoenas and discovery requests. The focus is on information related to the alleged destruction of cryptographic keys that controlled access to 25,000 ETH tokens, assets belonging to Celsius creditors.
These keys are unique digital credentials that govern access to cryptocurrency tokens. The administrator claims Fireblocks was responsible for storing and backing up specific keys associated with Celsius’ ETH tokens. The motion asserts that Fireblocks cannot return the keys due to their loss, attributed to negligence. Celsius seeks to investigate the circumstances surrounding this loss and determine Fireblocks’ responsibility.
The situation originated in 2020 when Celsius deposited over 25,000 ETH tokens with Stakehound SA, a Swiss digital coin staking firm. Fireblocks secured these tokens with cryptographic keys. The three parties maintained regular communication regarding the arrangement. However, Fireblocks allegedly destroyed the keys without creating backups, leading Stakehound to file a lawsuit against Fireblocks in Israel in 2021, which is still ongoing.
Celsius settled claims against Stakehound early in its bankruptcy proceedings, but the settlement did not fully compensate for the value of the lost tokens. The administrator believes Fireblocks possesses crucial information about the destruction of the keys, including details on their storage, backup procedures, and the circumstances of their loss. Discovery is intended to reveal the extent of Fireblocks’ responsibility and inform potential claims against the company.
Despite efforts to resolve the dispute directly with Fireblocks over the past month, the company has reportedly refused to produce the requested documents, offering only documents from the Israeli litigation. The administrator is also seeking permission to depose Fireblocks Chief Product Officer Idan Ofrat and CEO Michael Shaulov, who allegedly had specific knowledge of the arrangement, and to conduct any additional discovery deemed necessary.
The motion argues that the need for discovery outweighs any inconvenience to Fireblocks, and that without it, the administrator’s ability to recover assets for Celsius’ creditors will be impaired.
Celsius filed for Chapter 11 bankruptcy in July 2022, after freezing customer withdrawals amid crypto market turmoil, trapping $4.7 billion in digital assets. The company’s Chapter 11 plan, confirmed in November 2023, involved distributing remaining crypto assets to customers.
Since the bankruptcy filing, various disputes have arisen, including allegations against Chainalysis Inc. for misrepresenting Celsius’ financial health and claims against Cloudflare Inc. over a $50 million hack. Celsius founder and former CEO Alex Mashinsky was indicted on fraud charges and sentenced to 12 years in prison in May 2025.
Source: Law360
