Tether Prepares to Defend Itself Against Celsius Lawsuit, Assures Stability for USDT Holders

Tether, the company behind the stablecoin USDT, is preparing to defend itself against a lawsuit filed by the bankrupt crypto lender Celsius.

Crypto stablecoin issuer Tether is preparing to defend itself against a lawsuit filed by bankrupt crypto lender Celsius, which is seeking to recover billions of dollars in allegedly preferential Bitcoin (BTC) transfers.

Celsius filed a motion in the U.S. Bankruptcy Court for the Southern District of New York on Feb. 23, requesting the court to order Tether to return 57,428.64 BTC, currently valued at around $3.3 billion, to Celsius’s bankruptcy estate.

Celsius alleges that Tether secured these funds through what it describes as “preferential and fraudulent transfers” during a critical period before Celsius filed for Chapter 11 bankruptcy on July 13, 2022.

According to the motion, Celsius entered into a loan agreement with Tether in 2022, under which Celsius borrowed stablecoins from Tether for its business operations. However, as the crypto market crashed in mid-2022, Tether allegedly demanded additional collateral from Celsius.

Celsius claims that when it failed to provide the additional collateral, Tether liquidated the Bitcoin that Celsius had pledged as collateral at a lower price than the closing market rates of such markets on June 13, 2022, taking advantage of Celsius’s distressed circumstances.

Celsius alleges that Tether “applied Celsius’s Bitcoin against obligations owed to it for an average price of $20,656.88 each,” which is below the June 13th 2022 closing market rate of $22,487.39.

Celsius argues that these transactions, which it says were made with the knowledge of the impending bankruptcy, were designed to insulate Tether from Celsius’s bankruptcy by allowing it to collect on a greater portion of the outstanding loan than other creditors.

Celsius is also accusing Tether of breaching its contract with Celsius by failing to apply the proceeds of the liquidated Bitcoin to reduce Celsius’s outstanding loan obligations and by failing to return any excess proceeds to Celsius. Celsius is seeking damages of at least $100 million for these alleged contract breaches.

Tether has completely rejected Celsius’s allegations, referring to this lawsuit as a “shakedown.” In a statement on its website, Tether stressed that Bitcoin was liquidated on Celsius’s initiative and with the lender's consent in June 2022, during which time the crypto market experienced a significant drop.

“This is an empty lawsuit which seeks to compel us to return bitcoins obtained through sale of some of our holdings used to settle positions taken by Celsius. The claimant’s submissions are replete with several gaps and we are highly confident about both our contracts and actions.”

Tether also disputed the numbers provided by the lawsuit, indicating that it was Celsius who made decisions about liquidating BTC at prices determined by market conditions at that time.

“Celsius, not Tether, determined the price at which BTC was to be liquidated and fully consented to the liquidation price. Moreover, Celsius, not Tether, instructed where the proceeds of the liquidated BTC were to be applied,” Tether stated.

Paolo Ardoino, Tether’s CEO, said in a statement: “This is an empty lawsuit which seeks to compel us to return bitcoins obtained through sale of some of our holdings used to settle positions taken by Celsius.”

“The claimant’s submissions are replete with several gaps and we are highly confident about both our contracts and actions.”

He added that Tether is “prepared to take this case to court to prevent disgraceful money grabs.”

Tether has also sought to reassure its token holders, stating that even if the lawsuit does not go in their favor, it would not affect USDT’s stability. As of June 30, 2024, Tether Group’s consolidated equity was approximately $12 billion US dollars, which provides a substantial cushion against any probable financial liabilities.

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