Through the Blockchain Recovery Investment Consortium, LLC, Celsius Network Limited filed a significant lawsuit on 9 August 2024 against Tether Limited in the U.S. Southern District of New York Bankruptcy Court The defunct crypto lender accuses Tether, the leading stablecoin issuer, of fraudulent Bitcoin transfers, sparking legal contention.
Tether swiftly responded, denouncing the lawsuit as a mere “shakedown” intended to divert blame from Celsius’s own financial missteps. In a blog post, Tether USD revealed that Celsius used Bitcoin as collateral to borrow USDT in 2022, based on a mutually agreed-upon contract. USDT argues that its actions adhered strictly to this agreement.
According to Tether, when Bitcoin’s price dropped, Celsius failed to provide additional collateral, violating the terms of their agreement. Consequently, USDT liquidated the Bitcoin collateral as per the contract’s stipulations. The stablecoin issuer claims that the liquidation was executed under Celsius’s direct instructions.
Tether USD maintains that any excess funds from the liquidation were promptly returned to Celsius, insisting that it fulfilled its contractual obligations. Nonetheless, Celsius now demands approximately $2.4 billion in Bitcoin restitution, accusing USDT of improper liquidation and collateral mishandling.
Tether Defends Against Celsius Lawsuit
Tether CEO Paolo Ardoino defended company actions in the post on X, arguing that the lawsuit demonstrates a misunderstanding of market slippage, risk management, and liquidation procedures. He also highlighted that USDT is financially strong, with over $12 billion worth of equity, while assuring that USDT holders will not be affected.
Celsius Network emerged from bankruptcy earlier this year. After confirming the restructuring plan, the company disbursed more than $3 billion worth of cryptocurrency and cash to its creditors. This marked a pivotal moment in the crypto lender’s efforts to navigate its financial troubles.
As part of the bankruptcy resolution, Celsius creditors were given shares in Ionic Digital, a Bitcoin mining firm that launched in February. According to recent press releases, the organization has mined over 1,300 BTC and currently holds more than 1,800 BTC. For many stakeholders, this was viewed as another step towards stabilizing their finances.
The legal battle between Celsius and Tether adds another chapter to a messy story about the crypto world. As the case unfolds, it is expected of risk management perception and contractual compliance among crypto ecosystem participants. Both companies are expected to be very defensive at court levels.
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