Celsius, a once prominent crypto lender, has taken legal action against stablecoin issuer Tether for an alleged wrongful liquidation of over $800 million worth of BTC. The lawsuit was filed on August 9 in the US Bankruptcy Court for the Southern District of New York, claiming that Tether breached its contract with Celsius two years ago. The dispute stems from a loan agreement entered into in 2020, where Celsius could borrow USDT and EURT at low interest rates by providing BTC as collateral.
Tether quickly responded to the lawsuit by calling it a “baseless shakedown” and asserting its intention to fight the claims. The stablecoin issuer maintained that Celsius instructed Tether to sell the Bitcoin held as collateral when BTC’s price dropped in mid-2022. Tether emphasized that they liquidated the BTC and returned the excess to Celsius, refuting the allegations made in the lawsuit. Tether CEO Paolo Ardoino deemed the lawsuit meritless and expressed confidence in the company’s contract and actions.
While Celsius accuses Tether of unfairly improving its position as a creditor by requesting additional collateral and liquidating the entirety of Celsius’s pledged Bitcoin, Tether insists that it acted in accordance with the loan agreement. Ardoino clarified that Tether provides USDT to customers who overcollateralize in Bitcoin and have to send more collateral if the BTC price falls below a certain threshold. The conflicting narratives between Celsius and Tether highlight the complexity of their relationship and the legal battle that has ensued.
The lawsuit between Celsius and Tether has broader implications for the crypto industry, particularly in terms of contract enforcement and collateral management. As the dispute plays out in court, stakeholders in the crypto ecosystem will be closely monitoring the outcome to understand how contractual agreements and collateral obligations are interpreted and enforced. The legal battle underscores the importance of transparency, clarity, and accountability in financial transactions involving digital assets.
As Celsius and Tether continue to clash in court over the alleged wrongful liquidation of BTC collateral, the outcome of the lawsuit remains uncertain. Both parties have expressed confidence in their positions and are prepared to defend their actions. The legal proceedings will shed light on the intricacies of crypto lending agreements and the responsibilities of counterparties in managing collateral in volatile market conditions. The resolution of this dispute will set a precedent for similar cases in the future and may influence how participants in the crypto space approach risk management and compliance.