Bankrupt Celsius Demands $3.5B From Tether, Accusing Stablecoin Issuer of Asset Misappropriation

Defunct crypto lender Celsius has filed a lawsuit against Tether, accusing the stablecoin issuer of asset misappropriation.

Bankrupt cryptocurrency lender Celsius is now targeting Tether in its attempts to claw back billions of dollars in funds for creditors. The latest move sees Celsius filing a lawsuit against the world’s largest stablecoin company.

Bankrupt Celsius has filed a number of lawsuits against various cryptocurrency companies in recent weeks. The latest company to be targeted by the bankrupt crypto lender is Tether, the world’s largest stablecoin company. Other firms currently embroiled in various legal battles with Celsius include Badger DAO, Bancor, and Compound.

On Friday, August 9, Celsius filed its largest lawsuit yet against Tether, seeking billions of dollars in Bitcoin returns, damages, and legal fees. The company wants a refund of 39,542 BTC it used as collateral for loans it took from Tether, according to the latest court filing.

When the price of Bitcoin started to fall in early 2022, Tether allegedly requested more collateral from Celsius to cover the loans. The latest court document also reveals the crypto lender had taken out an additional $300 million in USDT loans from Tether a few months before — and within 90 days of — filing for bankruptcy in July.

Celsius claims to have obliged the request for additional collateral, sending more BTC as collateral on several occasions between May and June 2022. Following this payment, Tether made a second collateral demand but decided to liquidate Celsius’s collateral before the mandated ten-hour waiting period.

In its lawsuit, Celsius argues that Tether liquidated the collateral at a price point that unfairly benefited the stablecoin issuer without allowing the lender to provide the additional collateral.

“If Celsius had been given the opportunity to meet the collateral demand—which it had the contractual right to do—it could have been able to avoid the disposition of its Bitcoin at near the bottom of the cryptocurrency market. Instead, that disposition was carried out for the benefit of just one creditor: Tether,” the court filing reads.

Celsius is asking the court to order Tether to relinquish the 15,658.21 Bitcoin, 2,228.01 Bitcoin, and 39,542.42 Bitcoin preferentially transferred by the crypto lender to the stablecoin issuer, according to the filing. These transfers sum up to 57,428.64 BTC, which, at the current Bitcoin price of $61,110, is equivalent to roughly $3.5 billion.

Tether Labels Lawsuit A ‘Shakedown’

In a new blog post, Tether denied any wrongdoing against Celsius, calling the recent lawsuit “baseless.” According to the stablecoin company, Celsius is failing to recognize the clear validity of the agreement made years before its bankruptcy.

“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,” Tether said in the blog post.

After the report highlighted that the lawsuit could potentially impact Tether’s stablecoin, USDT, if the court rules in favor of Celsius, the stablecoin issuer’s CEO Paolo Ardoino took to the X platform to comment on the matter.

“In 2022, Tether made available USDt to some of its customers – including Celsius. Tether’s arrangements with customers are very simple: Tether provides USDt to selected customers who provide an overcollateralization in Bitcoin,” Ardoino stated in his post.

“If the price of bitcoin (the collateral) falls… https://t.co/UuEs1ig8zr”

— Paolo Ardoino ?? (@paoloardoino) August 10, 2024

Finally, Ardoino wasted no time mentioning Tether’s $12 billion consolidated equity and reassuring USDT holders that, in the “most remote scenario” where the lawsuit escalates, they will not be impacted.

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