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Celsius Initiates Legal Action Against Tether
Two years following its bankruptcy declaration, Celsius is attempting to reclaim lost assets by filing a lawsuit against Tether, claiming improper liquidation of BTC valued at over $800 million during the market downturn in mid-2022.
Background of the Lawsuit
The legal action, submitted on August 9 in the Southern District of New York Bankruptcy Court, contends that Tether breached its contractual obligations to Celsius two years prior. In 2020, both parties entered into a loan arrangement that permitted the once-reputable crypto lending platform to borrow USDT and EURT at minimal interest rates, collateralized by Bitcoin (BTC).
Market Decline and Liquidation Claims
As the bear market intensified in mid-2022, Bitcoin’s value plummeted, putting Celsius’s collateral at risk of liquidation, prompting Tether to demand additional collateral. The lawsuit asserts that Celsius transferred over 16,700 BTC in what it terms “Preferential Top-Up Transfers” and “Preferential Cross-Collateralization Transfers,” actions that allegedly gave Tether an unfair advantage over other creditors.
Details of the Collateral Agreement
According to the Token Agreement, Tether requested further collateral on June 13, 2022, allowing Celsius a ten-hour window to provide the necessary funds. However, the lawsuit claims that Tether did not honor this timeframe, proceeding instead to liquidate the entire collateral of 39,542.42 BTC, thereby nullifying Celsius’s remaining interest in the assets.
Implications of the Liquidation
The filing states, “This final preferential transfer, valued at over $2 billion today, also strengthened Tether’s position, as a significant portion of the collateral was avoidable and included the Preferential Top-Up Transfers, which were mixed with all posted Bitcoin.”
Tether’s Response to the Allegations
In response to the lawsuit, Tether and its CEO, Paolo Ardoino, issued statements the day after the filing. Ardoino clarified that Tether “provides USDT to chosen clients who over-collateralize with Bitcoin.” If the collateral’s value falls below the margin call threshold, the borrower must provide additional collateral; if they fail, Tether reserves the right to liquidate the borrower’s position.
Counterclaims from Tether
Contrary to Celsius’s assertions, Ardoino stated that the lender directed Tether to sell the Bitcoin held as collateral when BTC’s price fell. Tether maintained that it liquidated the BTC and successfully returned the excess to Celsius.
Conclusion on the Legal Dispute
“Now, more than two years later, this unfounded lawsuit aims to reclaim the Bitcoin that was sold to settle Celsius’ obligations. There are numerous inconsistencies in the claimant’s filing, and we are confident in the strength of our contract and the legitimacy of our actions,” Ardoino emphasized. He further characterized the lawsuit as a “meritless shakedown” that ultimately serves no purpose other than to benefit a few.
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Reassurance for Tether Token Holders Amid Legal Challenges
In light of recent developments, Ardoino has provided a comforting message to holders of Tether tokens, asserting that their investments remain secure. He emphasized that even in the unlikely event that this unfounded legal action progresses, Tether’s financial foundation—with an equity valuation nearing $12 billion—will protect its stakeholders.
The Legal Landscape
The involvement of various legal professionals, financial experts, and consultants in this case signifies the complexity and seriousness of the situation. However, Ardoino’s confidence suggests that the company’s robust financial position acts as a buffer against potential repercussions stemming from this lawsuit.
Looking Ahead
As the situation unfolds, Tether remains committed to maintaining stability for its users and stakeholders. The company continues to operate with transparency and resilience, ensuring that its community can navigate these challenges with assurance.
