Celsius Network Sues Tether, Claiming $2 Billion in Losses Due to ‘Fraudulent’ Activities
Celsius Network Ltd. has filed a lawsuit against Tether and its affiliated entities. The lawsuit alleges that the USDT issuer conducted “fraudulent” and “preferential” transfers of Bitcoin (BTC) amounting to over $2 billion. The complaint, lodged in federal bankruptcy court, seeks to reclaim the collapsed estate’s lost Bitcoin due to the USDT issuer’s actions during a critical period leading up to the firm’s bankruptcy.
Celsius Network’s Allegations Against Tether
Celsius Network, a prominent crypto lender, entered into a loan agreement with Tether Ltd. in 2020. This arrangement allowed the lender to borrow stablecoins, specifically USDT and Euro Tether (EURT), at low-interest rates. In return, the crypto lender posted substantial collateral, including Bitcoin, to secure these loans.
At its peak, the firm had borrowed nearly $2 billion in USDT, backed by tens of thousands of BTC. The lawsuit focuses on actions taken by the USDT issuer during the ninety-day period before the crypto lender filed for bankruptcy on July 13, 2022.
Preferential Application Transfer & Breach of Contract
On June 13, 2022, the stablecoin firm issued a final demand for additional collateral. The crypto lender, in accordance with their agreement, had 10 hours to respond. However, the stablecoin issuer proceeded to apply the entirety of Celsius Network’s collateral, i.e., 39,542.42 BTC, immediately, without granting the contractually stipulated time.
This action, referred to as the “Preferential Application Transfer,” allegedly allowed Tether to cover its exposure. However, the bankrupt crypto lender was “robbed” of its remaining BTC at a low market value.
Moreover, the lawsuit argues that the stablecoin firm’s breach of the contract’s 10-hour waiting period resulted in a “fire sale” of the now-bankrupt estate’s Bitcoin, with all 39,542.42 BTC applied against Celsius Network’s outstanding debt. Tether’s valuation of BTC at $816.82 million is significantly less than its current worth of more than $2 billion.
This caused substantial financial damage to the crypto lender. The court filing dated August 9 states that the stablecoin firm sold this Bitcoin at an average price of $20,656.88 each, notably below the market closing BTC price of $22,487.39 on that date.
Crypto Lender Demands Clawback
The lawsuit also contends that the USDT issuer’s liquidation of Celsius’ Bitcoin was commercially unreasonable. In addition, the complaint highlights that established market practices dictate that such a large block of BTC should be sold over a longer period to minimize price impact and secure better pricing.
Hence, the lawsuit seeks “recover” the preferential and fraudulent transfers of Bitcoin. In addition, the crypto lender wants to claim damages for the alleged breach of contract. Thus, the bankrupt estate is demanding that the court order Tether to return the value of the BTC or its equivalent amount in damages.
Conclusion
The lawsuit filed by Celsius Network against Tether highlights the controversy surrounding the stablecoin issuer’s handling of customer assets. The crypto lender alleges that Tether’s actions during the bankruptcy proceedings were "fraudulent" and led to substantial losses. The lawsuit aims to reclaim the lost Bitcoin and seeks damages for the breach of contract.
FAQs
Q: What is the dispute between Celsius Network and Tether about?
A: Celsius Network alleges that Tether’s actions during the bankruptcy proceedings were "fraudulent" and led to the loss of $2 billion in Bitcoin.
Q: What was the purpose of Celsius Network’s loan agreement with Tether?
A: The loan agreement allowed Celsius Network to borrow stablecoins at low-interest rates and posted Bitcoin as collateral to secure the loans.
Q: What is the basis of Celsius Network’s claim against Tether?
A: Celsius Network claims that Tether breached the contract’s 10-hour waiting period and liquidated the crypto lender’s Bitcoin at a low market value, causing significant financial damage.
Q: What is Celsius Network seeking from Tether?
A: The crypto lender is seeking to "recover" the preferential and fraudulent transfers of Bitcoin and damages for the alleged breach of contract.
