Celsius is suing Tether over dispute on bitcoin collateral liquidation, demands $3.5 billion
Celsius Network, a bankrupt cryptocurrency lender, is demanding $3.5 billion in damages and returns from Tether, alleging improper liquidation of Bitcoin collateral.
Tether labeled the lawsuit a “shake down,” saying that the claims originate from a legitimate agreement made before Celsius’s bankruptcy.
“This baseless lawsuit against Tether proves the adage that ‘no good deed goes unpunished’,” Tether wrote in a blog post.
Tether said that Celsius had the responsibility to post more collateral as BTC prices fell.
“When Celsius chose not to post additional BTC it directed Tether to liquidate the BTC collateral Tether held in order to close out its roughly 815 million USDT position with Tether,” Tether’s blog post read. “…this lawsuit seeks to improperly impose the costs of Celsius’ mismanagement and failure on Tether.”
The lawsuit, filed on August 9 in the United States Bankruptcy Court for the Southern District of New York, stems from a 2022 agreement where Tether provided USDT, a stablecoin, to Celsius in exchange for Bitcoin (BTC) as collateral.
As BTC prices fell to as low as $24,000 in June 2022, the agreement required Celsius to post additional collateral.
Celsius’ Claims
According to the lawsuit filing, Celsius had notified Tether that it was “working on preparing the BTC [Bitcoin]” to meet the collateral demand and reminded Tether that it had ten hours to do so under the agreement. Despite this, Tether’s representatives demanded immediate payment, igniting a “fire sale” of Celsius’s collateral.
“However, Tether’s representatives demanded immediate payment notwithstanding expressly acknowledging that Celsius ‘have 10h in the [Agreement]…” the filing states.
The filing states that Tether sold Celsius’s Bitcoin in tranches over a few hours, applying a total of 39,542.42 BTC against Celsius’s outstanding debts.
In the 90 days leading up to its bankruptcy, Celsius had transferred this amount to Tether as collateral. Celsius outlines three types of transfers within its total demand — 15,658.21 BTC in various “top-up transfers” to maintain collateral levels, 10,700 BTC as new loan collateral including 2,228.01 BTC of excess, and the final liquidation of 39,542.42 BTC on June 13, 2022.
Celsius is seeking the return of roughly 57,428.64 BTC, valued at approximately $3.48 billion, which includes “top up transfers” and the final liquidation. Celsius claims $100 million in damages for breach of contract.
Meanwhile, there is a notable discrepancy in the valuation of these Bitcoin transfers. While Celsius demands the return or equivalent value of 57,428.64 BTC, Tether’s blog post mentions $2.4 billion in BTC.
Celsius was a lending platform that paused withdrawals and filed for bankruptcy in June 2022 amid market turmoil following the collapse of Terra and Luna.
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