Celsius Crypto Platform Sues Tether for Billions in Bitcoin
A recent lawsuit filed by the bankrupt lending platform Celsius against Tether has sparked a legal battle in the crypto world. The lawsuit demands a whopping 39,542 BTC, claiming that this amount was collateral for a loan from Tether, the issuer of the USDT stablecoin. The drama unfolded after Tether requested additional collateral following a drop in the price of Bitcoin in early 2022.
Celsius complied with Tether’s request, but the collateral was reportedly liquidated by the USDT issuer. The lending platform alleges that Tether liquidated the entire collateral within hours, despite Celsius raising funds during the specified period as per the contract. Former Celsius CEO Alex Mashinsky supposedly allowed Tether to liquidate the collateral in an orderly manner on June 13, 2022, without providing written consent, according to the lawsuit.
In response to the lawsuit, Tether CEO Paolo Ardoino defended the company’s actions, stating that all procedures, including over-collateralization, margin calls, and liquidation, were carried out as instructed by Celsius management. Ardoino criticized Celsius for lacking an understanding of market concepts like slippage and risk management, adding that the liquidation was directed by Celsius management.
Furthermore, Celsius demanded an additional 15,658 BTC and 2,228 BTC, totaling 57,428 BTC, in addition to the initial 39,542 BTC. The company claims that instead of providing extra collateral, Celsius instructed Tether to liquidate the Bitcoin collateral to close a $815 million position.
The dispute with Tether has deepened the financial woes of Celsius, which faced liquidity problems in mid-2022 amid a Bitcoin crash. Celsius claims that Tether acted in bad faith by quickly liquidating a significant amount of cryptocurrency, violating the terms of their agreement and leading to financial difficulties and bankruptcy for the lending platform.
Celsius Network’s bankruptcy in 2022 prompted a freeze on client asset withdrawals, followed by a declaration of bankruptcy a month later. The company’s explanation for the freeze was to “stabilize liquidity,” although analysts believe it was due to liquidity issues.
In a twist of events, Celsius Network’s creditors approved a reorganization plan, leading to court approval in November 2023. The company emerged from bankruptcy proceedings, intending to pay creditors $3 billion. However, in July 2023, Celsius CEO Alex Mashinsky was arrested following a lawsuit by the SEC, accusing him of fraud and market manipulation.
As the legal battle between Celsius and Tether unfolds, the outcome remains uncertain. The lawsuit sheds light on how Tether navigated financial challenges during the 2022 bear market, showcasing the complexities and risks inherent in the crypto industry. The saga continues, with both parties gearing up for a protracted legal battle in the volatile world of cryptocurrency.