Bankrupt cryptocurrency lending firm Celsius Network has launched legal proceedings against Tether, the company behind the USDT stablecoin. The lawsuit, which was filed in connection with a contractual dispute dating back to 2022, alleges that Tether breached its agreement by unjustifiably liquidating 39,542.42 bitcoins held as collateral for a loan issued in USDT. Celsius maintains that Tether’s decision to sell Bitcoin at the time was inappropriate and a breach of the loan agreement.
Celsius files lawsuit against Tether
Celsius Network’s disparity with Tether began with a Bitcoin crash in 2022 and ultimately contributed to the cryptocurrency lender Filing for bankruptcy in July 2022. The legal dispute centers on a revised agreement made in January 2022, which allowed Celsius to borrow USDT from Tether by securing the loan with collateral in Ether, Tether Gold, or Bitcoin.
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At the height of its debt, Celsius had raised nearly $2 billion worth of USDT from Tether, using tens of thousands of Bitcoins as collateral.
Under the new agreement, Tether would have to post a notice and wait 10 hours if the value of the collateral fell below a specific threshold. However, Bitcoin’s crash in early 2022 meant that the value of the Bitcoin collateral held by Tether plummeted at the same time.
As such, Tether demanded Celsius to deposit more collateral, a demand it complied with by transferring 15,658.21 Bitcoin and another 2,228.01 Bitcoin of excess collateral for another loan.
He complaint It claims that on June 13, 2022, Tether issued another demand for additional collateral. Contrary to the agreement’s requirement to wait ten hours, Tether allegedly proceeded to liquidate all Bitcoin collateral without allowing Celsius the stipulated period to service the demand.
“Tether then proceeded to misapply 39,542.42 Bitcoin (the entirety of the collateral Celsius had posted), using the pledged Bitcoin to cover its entire exposure but destroying Celsius’ residual interest in the collateral,” the complaint reads.
Tether says lawsuit is baseless
At the time, the 39,542 BTC collateral that Celsius is seeking a refund for was worth around $800 million. However, the value of Bitcoin has since grown and the collateral is now worth over $2 billion at current prices.
In answerTether called the lawsuit baseless. The stablecoin firm also confirmed Celsius Network’s claim to $2.4 billion in BTC, though it described it as another “blatant attempt at a litigation money grab” that it will never succumb to.
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Additionally, the lawsuit also demands the return of 15,658.21 Bitcoins and an additional 2,228.01 Bitcoins from a top-up transfer, bringing the total value claimed to over $3.5 billion at Bitcoin’s current price.
In other news, Tether’s USDT recently… crossed a new milestone with a market capitalization of $115 billion.
Featured image from WSJ, chart from TradingView
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