- Failed crypto lending platform, Celsius, has sued stablecoin issuer Tether for US$3.5 billion, alleging the misappropriation of tens of thousands of Bitcoin.
- The lawsuit stems from a deal struck between the two parties in 2022 as Celsius entered bankruptcy proceedings—the lending platform borrowed USDT from Tether in exchange for BTC, which was plummeting in value at the time.
- Celsius alleges that Tether liquidated over 57,000 of its BTC without warning, whereas Tether says the suit is baseless, insisting Celsius instructed it to liquidate the BTC.
The fallout from the 2022 collapse of Celsius continues, with the bankrupt lending platform now suing stablecoin issuer Tether in bankruptcy court for approximately US$3.5 billion (AU$5.3 bn).
In its suit, Celsius claims that Tether misappropriated tens of thousands of Bitcoin. Celsius is seeking the return of those assets plus damages and legal fees.
There’s some confusion around exactly how much BTC Celsius is seeking, with Tether claiming the figure is around 39,000 BTC valued at around US$2.4 billion (AU$3.64 bn)—but court documents show the actual figure may be over 57,000 BTC, worth close to US$3.4 billion (AU$5.16 bn).
Related: Celsius Network Exits Bankruptcy: Court Approval Sees End of One of Crypto’s Largest Failures
Suit Stems from Deal Made Amid Celsius Collapse
The origins of this lawsuit stem from the early stages of Celsius’ bankruptcy proceedings way back in 2022. If you recall, 2022 was a particularly rough time for crypto—FTX had just exploded spectacularly and confidence in crypto was plummeting, along with prices.
Amid this chaos, Celsius sought to offload some of its Bitcoin, which at the time was rapidly losing value, swapping it for Tether’s USDT stablecoin. Tether claims that in all, Celsius exchanged 39,542.42 BTC to USDT; however, court documents show that Celsius is pursuing a larger figure, a total of 57,428.64 BTC made up of numerous transfers.
As part of the deal, Tether required that Celsius add more BTC as its value continued to decline, in order to balance the loan and avoid liquidation. Celsius claims that Tether wound up liquidating its position without giving it any notice or the opportunity to provide more collateral to avoid liquidation.
Despite the exchange with Tether taking place in 2022, when BTC was worth far less than it is now, Celsius is seeking to be reimbursed for its BTC fully at today’s prices, which comes in at just under US$3.4 billion compared to around US$1.2 billion (AU$1.82 bn) based on contemporaneous prices.
Tether Says Suit Is Baseless “Shakedown” Attempt
In a statement Tether characterised Celsius’ case as baseless, dishonest and nonsensical:
The complaint is undermined by the actual facts underlying the agreement between Celsius and Tether, relies on an obvious misapplication of the law, ignores the numerous defenses that Tether has to the claims asserted against it and raises substantial jurisdictional questions.
TetherThe stablecoin issuer added it looks forward to fighting it in court:
We look forward to responding in court to this contrived, meritless shakedown that will benefit nobody other than the lawyers, bankers and consultants involved in bringing this case.
TetherIn contrast to Celsius’ version of events, Tether says the bankrupt lending platform knew it was going to be liquidated and chose not to add any additional collateral—effectively choosing to close out its position and explicitly directing Tether to liquidate its BTC:
As the price of BTC began to fall in June 2022, the agreement required Celsius to post additional collateral to avoid the liquidation of its BTC. When Celsius chose not to post additional BTC it directed Tether to liquidate the BTC collateral Tether held in order to close out its roughly 815 million USD₮ position with Tether.
TetherRelated: Tether Reports Record US$5.2 Billion Net Profit for First Half of 2024, USDT Market Cap Nears US$115 Billion
Tether also noted that it’s in a strong financial position, citing its latest attestation report which showed it currently holds almost US$12 billion (AU$18.22 bn) of consolidated equity. Because of its strong finances, which Tether attributes to its “prudent management”, it claims that even if Celsius’ suit were to “get somewhere” Tether token holders would not be affected in any way.
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