Celsius, a company that filed for bankruptcy two years ago, is now taking legal action against Tether for what they claim was the wrongful liquidation of over $800 million worth of BTC. The lawsuit, filed in the US Bankruptcy Court for the Southern District of New York on August 9, accuses Tether of breaking their contract with Celsius. The dispute stems from a loan agreement made in 2020, where Celsius could borrow USDT and EURT by posting bitcoin as collateral at low interest rates. However, when BTC’s price plummeted during the bear market in mid-2022, Tether demanded additional collateral from Celsius.
In response to the lawsuit, Tether referred to it as a “baseless shakedown” and pledged to defend their position. Tether’s CEO, Paolo Ardoino, clarified that Tether provides USDT to customers who overcollateralize with bitcoin. If the price of the collateral drops below a certain threshold, Tether has the right to liquidate the customer’s position. Ardoino stated that Celsius instructed Tether to sell the bitcoin used as collateral when BTC’s price fell in mid-2022, and the excess was returned to Celsius.
Celsius alleges that Tether did not adhere to the ten-hour deadline stipulated in their Token Agreement and proceeded to liquidate all of Celsius’s collateral, totaling over 39,000 BTC. This move purportedly gave Tether an unfair advantage as a creditor. Additionally, Celsius argues that the collateral sold by Tether to cover their position should be returned. However, Tether asserts that the lawsuit is unfounded and is confident in the legality of their actions.
Despite the legal battle, Tether assures token holders that they will not be affected, even in the unlikely event that the lawsuit progresses. The stablecoin issuer maintains that they have nearly $12 billion in equity, emphasizing their financial stability. Tether describes the lawsuit as a meritless attempt to extract funds and suggests that it will only benefit legal professionals involved in the case.
The legal conflict between Celsius and Tether highlights the complexities and risks associated with the cryptocurrency market. As the case unfolds, it will be essential to examine the validity of the claims made by both parties and evaluate the contractual obligations outlined in the loan agreement. The outcome of this lawsuit could have significant implications for similar agreements in the crypto lending sector and may set a precedent for future disputes in the industry.
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