Celsius, a crypto lender that filed for bankruptcy two years ago, is now taking legal action against Tether for an alleged mishandling of over $800 million worth of BTC. According to the lawsuit filed on August 9 in the US Bankruptcy Court for the Southern District of New York, Celsius claims that Tether violated their contract by not following proper procedures during a collateral liquidation process that took place in mid-2022.
The lawsuit alleges that Tether made improper transfers that unfairly favored the stablecoin issuer over Celsius as a creditor. Tether requested additional collateral from Celsius during a bear market, and when Celsius failed to deposit the funds within the specified timeframe, Tether proceeded to liquidate all of the collateral posted by Celsius, totaling over 39,000 bitcoins. Tether argues that it acted within its rights to protect its position as a lender and that Celsius had instructed them to liquidate the collateral once BTC’s price dropped.
Tether’s CEO, Paolo Ardoino, quickly responded to the lawsuit by referring to it as a “baseless shakedown.” According to Ardoino, Tether had followed the instructions given by Celsius to liquidate the collateral when necessary, and any excess funds from the liquidation were returned to Celsius. Ardoino expressed confidence in the legality of Tether’s actions and criticized the lawsuit as an attempt to extract funds without merit.
Despite the ongoing legal battle, Tether reassured its token holders that they would not be affected by the lawsuit. Ardoino stated that even in the unlikely event that the lawsuit progresses, Tether has significant equity reserves to cover any potential losses. He dismissed the lawsuit as a money-making scheme for legal professionals and consultants involved in the case, rather than a legitimate attempt to address any wrongdoing on Tether’s part.
The legal dispute between Celsius and Tether highlights the complexities of contractual agreements in the crypto lending space. Both parties have presented conflicting narratives regarding the events leading up to the liquidation of collateral, underscoring the need for clear and unambiguous terms in such agreements. As the case progresses, the crypto community will be watching closely to see how the courts interpret the contractual obligations of Tether and Celsius in this high-stakes legal battle.
