Two years after filing for bankruptcy, Celsius is trying to recover some funds by suing Tether for an alleged wrong liquidation of more than $800 million worth of BTC (at prices in mid-2022).
The stablecoin issuer was quick to respond, calling the lawsuit a “baseless shakedown” and promised to fight for a win.
Celsius Goes After Tether
The lawsuit, filed on August 9 in the US Bankruptcy Court for the Southern District of New York, alleges, among other things, that Tether broke its contract against Celsius two years ago. The two entities had entered into a loan agreement in 2020, which allowed the once prominent crypto lender to borrow USDT and EURT at low interest rates by posting collateral in the form of bitcoin (BTC).
During the peak of the bear market in mid-2022, BTC’s price tumbled hard, and Celsius’s collateral was at stake to be liquidated, which is why Tether asked for more. According to the lawsuit filing, the lender transferred more than 16,700 BTC additionally in moves described as “Preferential Top-Up Transfers” and “Preferential Cross-Collateralization Transfers,” which “unfairly” improved Tether’s position as a creditor compared to others.
The stablecoin issuer requested additional collateral on June 13, 2022, and Celsius was “entitled to ten hours to deposit” the funds, according to the Token Agreement between the two. However, the filing alleges that Tether didn’t wait for the ten-hour deadline. Instead, the firm “forged ahead with an improper application of 39,542.42 Bitcoin-the entirety of collateral that Celsius had posted, using the pledged Bitcoin to cover its exposure in full, but destroying Celsius’s residual interest in the collateral.”
“This final preferential transfer (as defined below, the “Preferential Application Transfer”), worth in excess of $2 billion in today’s dollars, also improved Tether’s position because a substantial portion of the putative collateral was avoidable and comprised of the Preferential Top-Up Transfers, which were commingled with the entirety of the posted Bitcoin.” – reads the filing.
Tether Responds
Just a day after the lawsuit was filed, Tether, and its CEO – Paolo Ardoino, issued statements in response. The chief exec explained that Tether “provides USDT to selected customers who provide an overcollateralization in Bitcoin.” Should the price of the collateral fall below the margin call price, then the borrower needs to send more collateral. If they fail to do so, Tether “has the right to liquidate the customer’s position.”
Unlike Celsius’s claims from above, Ardoino said that the lender “instructed Tether to sell the Bitcoin that Tether held as collateral” once BTC’s price dropped in mid-2022. The stablecoin issuer explained at the time that it liquidated the BTC and managed to “return the excess to Celsius.”
“Now, more than two years later, this baseless lawsuit is trying to claim that we should give back the bitcoin that were sold to cover Celsius’ position. There are plenty of flaws in the claimant’s filing and we’re very confident in the solidity of our contract and our actions.” – continued Ardoino.
Tether’s statement further described the lawsuit as a “meritless shakedown” that will “benefit nobody other than the lawyers, bankers, and consultants involved in bringing this case.”
In any case, Ardoino reassured Tether token holders that they will not be impacted even if “in the most remote scenario,” this “baseless lawsuit will get somewhere” because the company has equity of almost $12 billion.
The post CEO Paolo Ardoino Responds to Celsius’s Lawsuit Against Tether, Calls it ‘Baseless Shakedown’ appeared first on CryptoPotato.