Celsius, the bankrupt cryptocurrency platform, has filed a lawsuit against Tether, the issuer of the largest stablecoin USDT, seeking compensation of 57,428.64 bitcoins (BTC) or their equivalent in US dollars. As of August 9, 2023, when the lawsuit was filed, this amount was approximately $3.5 billion.
Reasons for the Lawsuit and Celsius's Demands
The lawsuit is based on a credit agreement signed between the crypto company and Tether in 2020. According to this contract, the crypto firm was allowed to borrow stablecoins USDT and EURT at low interest rates, using Bitcoin as collateral. At its peak, the crypto platform owed Tether over $2 billion, securing the debt with a substantial amount of BTC.
However, the crypto platform claims that the use of Bitcoin as collateral was fraudulent. In the lawsuit, the company stated that Tether sold the collateral assets at a time when the platform was nearing bankruptcy and the price of Bitcoin was plummeting. According to the company, these actions allegedly allowed Tether to avoid the consequences of the platform’s collapse.
Representatives of the crypto platform assert that these actions "undoubtedly improved Tether’s position" during a period when the organization was already on the brink of financial collapse, and the value of the collateral assets had significantly dropped.
Challenging Tether’s Actions
Celsius also alleges that Tether violated the terms of the agreement, particularly the obligation to observe a 10-hour waiting period before liquidating the bitcoins. Celsius claims that Tether carried out the liquidation at a commercially disadvantageous price. The company noted that the bitcoins were sold at an average price of $20,656.88, which was significantly lower than the market closing price of $22,487.39 on June 13, 2022.
Celsius emphasized that Tether's actions, including selling the bitcoins at a depressed price, "prevented the company from weathering the market downturn and hindered the possibility of seeking bankruptcy relief."
Purpose of the Lawsuit
Celsius is seeking the return of the allegedly unlawfully transferred bitcoins, totaling over 57,000 tokens. The company demands either the return of the BTC or the equivalent amount in dollars as compensation. Celsius asserts that these "preferential and fraudulent transfers" should be annulled, and the value of the assets returned in the interest of its estate.
Context of the Situation and Tether’s Position
This lawsuit highlights how Tether managed to avoid the financial difficulties that other crypto companies faced during the bear market of 2022. At that time, Tether's CTO Paolo Ardoino stated that the company had liquidated its Celsius loan "without loss" and minimized market impact. Ardoino mentioned that Tether's actions were aimed at mitigating risks, allowing the company to maintain its position in challenging conditions.
The lawsuit by Celsius reveals details of how Tether navigated the crisis while many other crypto companies faced severe financial challenges. A key question in the dispute is whether Tether's actions were legal and whether they complied with the terms of the agreement between the two companies.
Conclusion
In summary, the lawsuit between Celsius and Tether underscores the complex relationship between two major players in the cryptocurrency market. While Celsius seeks to recover its assets or receive compensation, this case highlights the risks and complexities associated with lending in the crypto industry. The outcome of the legal battle could have significant implications for both parties and the broader cryptocurrency ecosystem.
