In a surprising development, Celsius, a bankrupt crypto lending platform, has filed a lawsuit against Tether, the primary issuer of USDT, seeking to recover over $3.3 billion in bitcoin. The lawsuit highlights growing tensions between the two companies and raises questions about lending and collateral management practices in the crypto industry.
Celsius demands $3.3 billion from Tether!
The case dates back to 2020, when Celsius entered into a loan agreement with Tether, allowing it to borrow USDT and EURT stablecoins at low interest rates. In exchange, Celsius provided substantial bitcoin collateral. However, when the crypto market crashed in mid-2022, Celsius alleged that Tether fraudulently used the bitcoin as collateral to meet its loan obligations.
According to Celsius, Tether liquidated the bitcoins at an average price of $20,656.88, well below the market closing price of $22,487.39 on June 13, 2022. Celsius claims that these preferential and fraudulent transfers improved Tether’s position, to the detriment of Celsius, which was heading toward bankruptcy. As a result, Celsius is asking the court to recover the value of the transferred bitcoins or an equivalent amount in damages, or approximately $3.3 billion.
Tether, for its part, called the lawsuit an “attempted racketeering” and said it would vigorously defend itself against the charges. Tether CEO Paolo Ardoino stated that the loan agreement required Celsius to provide additional collateral to prevent liquidation of its bitcoins. When Celsius chose not to provide additional collateral, Tether liquidated the bitcoins in accordance with the agreement.
The Risk of Crypto-Backed Loans
This case highlights the risks and complexities of crypto-backed lending, particularly in volatile market conditions. It also highlights the challenges crypto businesses face in managing collateral and enforcing contractual agreements. As the trial continues, the crypto industry will be closely monitoring this case, as it could have significant implications for lending and collateral management practices in the future.
As the SEC VS Ripple case has just concluded, a new legal battle is beginning in the crypto ecosystem. The conflict between Celsius and Tether is a reminder of the risks inherent in crypto-backed lending and the importance of transparency and compliance in this growing sector.
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