Crypto Industry Watches Tether vs. Celsius Litigation Closely
Tether, the powerhouse behind USDT, the world's leading stablecoin, is gearing up to defend against what it terms "shakedown" litigation from the bankrupt crypto lender Celsius. The lawsuit, filed in the U.S. Bankruptcy Court of the Southern District of New York, demands that Tether return 57,428.64 bitcoin (BTC) or the equivalent of $3.3 billion at current prices.
Specifically, Tether reportedly sold Celsius Network's 39,542.42 BTC in a "fire sale," causing the loss of funds. Celsius was required to post BTC as collateral for loans, with the agreement stipulating additional collateral if the BTC value fell below a certain threshold. The crypto lender claims the collateral application was a fraudulent transfer not permitted under the bankruptcy code.
Tether swiftly responded, criticizing the lawsuit as baseless and stating that the BTC was sold at Celsius' direction during the market downturn in June 2022. "This lawsuit incredibly now seeks the return of approximately US$2.4 billion worth of BTC from Tether, despite the BTC being liquidated at Celsius’ direction and with Celsius’ consent at June 2022 prices," Tether said. The stablecoin issuer also stated that Celsius opted not to post extra collateral to settle its approximately $815 million USDT position with Tether.
At the core of the dispute is a loan agreement that enabled Celsius to borrow stablecoins to sustain its operations. When the market crashed in mid-2022, Celsius accuses Tether of insulating itself from the bankruptcy by making "preferential and fraudulent transfers" of bitcoin.
According to the lawsuit, Tether demanded and received additional collateral from Celsius to improve its standing in the looming bankruptcy. Tether CEO Paolo Ardoino dismissed these claims, expressing confidence in the contract's solidity and vowing to fight the lawsuit to its conclusion, emphasizing that such "shameless money grabs" would not prevail.
Celsius further contends that Tether applied its Bitcoin collateral at an average price of $20,656.88, significantly lower than the market price at the time, and is now seeking to recover the Bitcoin or its equivalent value for the benefit of its estate. The lawsuit also includes a demand for $100 million in damages for breaches of contract.
Tether, however, maintains that the agreement required Celsius to post additional collateral to avoid liquidation and that the BTC was liquidated only after Celsius chose not to post the necessary collateral. Tether assured that its consolidated equity, standing at nearly $12 billion as of June 30, ensures that Tether token holders will remain unaffected, even in the unlikely event that the lawsuit gains traction.
Conclusion
The Tether vs. Celsius lawsuit highlights the complex relationships within the crypto industry. With $3.3 billion at stake, the outcome could reshape stablecoin operations and inter-company dealings. As regulatory scrutiny intensifies, this case may set crucial precedents for collateral management and financial practices in the volatile cryptocurrency market.
FAQs
1: What is the basis of Celsius's lawsuit against Tether?
Celsius alleges that Tether demanded excessive additional collateral before Celsius's bankruptcy. This demand allegedly worsened Celsius's financial situation, contributing to its collapse. Celsius claims this action was unfair and detrimental to its stability.
2: How has Tether responded to the lawsuit?
Tether has dismissed the lawsuit as baseless. They argue that Celsius's claims are unfounded and attribute Celsius's financial troubles to its own mismanagement. Tether views the lawsuit as an opportunistic attempt by Celsius to recover from its financial failures.
3: What are the potential consequences of this lawsuit for the crypto industry?
If Celsius wins, it could significantly impact Tether's position as a leading stablecoin issuer. The case may set precedents for collateral handling and financial dealings between crypto firms. It could also influence future regulations in the cryptocurrency sector.
4: Why is this lawsuit attracting attention from the broader crypto market?
The case involves two major players in the crypto industry and a substantial sum of $3.3 billion. Its outcome could affect stablecoin operations, inter-company financial practices, and regulatory approaches. The verdict may have far-reaching implications for how crypto firms manage collateral and handle financially troubled entities.
This article has been refined and enhanced by ChatGPT.
