TLDR
- Celsius Network has filed a lawsuit against Tether over $2.4 billion worth of Bitcoin collateral
- The dispute stems from a loan agreement made in 2022
- Celsius claims Tether improperly liquidated 39,542.42 Bitcoins without proper notice
- Tether denies wrongdoing and calls the lawsuit “baseless” and a “shakedown”
- The case is being heard in the U.S. Bankruptcy Court for the Southern District of New York
Celsius Network, a bankrupt cryptocurrency lending platform, has initiated legal action against Tether, the company behind the USDT stablecoin.
The lawsuit, filed in the U.S. Bankruptcy Court for the Southern District of New York on August 9, 2024, centers around a dispute over $2.4 billion worth of Bitcoin collateral.
The conflict originated from a loan agreement made in 2022. Celsius claims that Tether violated this agreement by improperly liquidating 39,542.42 Bitcoins that were held as collateral for a loan issued in USDT.
According to Celsius, the revised agreement from January 2022 allowed them to borrow USDT from Tether by securing the loan with collateral in Ether, Tether Gold, or Bitcoin.
At the peak of its borrowing, Celsius had secured nearly $2 billion in USDT from Tether, using tens of thousands of Bitcoins as collateral. The agreement reportedly required Tether to post a notice and wait for 10 hours if the value of the collateral fell below a specific threshold.
Celsius alleges that on June 13, 2022, Tether issued a demand for additional collateral but proceeded to liquidate the entire Bitcoin collateral without allowing the stipulated 10-hour period.
The lawsuit states, “Tether forged ahead with an improper application of 39,542.42 Bitcoin—the entirety of collateral that Celsius had posted——using the pledged Bitcoin to cover its exposure in full, but destroying Celsius’s residual interest in the collateral.”
The value of the disputed Bitcoin has significantly increased since 2022. At the time of liquidation, the 39,542 BTC was worth around $800 million. However, due to Bitcoin’s price appreciation, the same amount is now valued at over $2 billion.
Tether has strongly refuted these claims. In a response published on its website, Tether labeled the lawsuit as “baseless” and a “shameless litigation money grab.” The stablecoin issuer insists it acted within the terms of the 2022 agreement, which required Celsius to post additional Bitcoin as collateral when prices fell.
According to Tether, when Celsius failed to meet these requirements, they were instructed by Celsius to liquidate the Bitcoin to cover an $815 million debt. Tether stated, “This lawsuit seeks to improperly impose the costs of Celsius’ mismanagement on Tether.”
Tether also questioned the lawsuit’s legal foundation, suggesting there was an “obvious misapplication of the law” and raising concerns over jurisdiction. The company assured investors of its financial strength, reporting $12 billion in consolidated equity as of June 30, 2024.
The legal dispute adds another chapter to Celsius Network’s financial troubles. The company filed for Chapter 11 bankruptcy in July 2022, with $5.5 billion in liabilities outweighing assets by $1.2 billion. Following the collapse, former CEO Alex Mashinsky faced federal criminal charges and civil lawsuits.
As of August 2024, creditors have approved a $2 billion restructuring plan aimed at guiding Celsius out of bankruptcy. The outcome of this lawsuit against Tether could significantly impact these ongoing efforts to resolve Celsius Network’s financial situation.
