Celsius Network Ltd. has filed a lawsuit against Tether and its affiliates, alleging the stablecoin issuer fraudulently transferred over $2 billion worth of Bitcoin. The Celsius lawsuit claims these actions occurred during a critical period leading up to its collapse.
The Celsius lawsuit, filed in federal bankruptcy court, seeks to recover the lost Bitcoin from Tether. Celsius alleges that the stablecoin company engaged in “preferential” cryptocurrency transfers, benefiting itself at the expense of Celsius creditors.
The two companies have had a loan agreement since 2020. Celsius borrowed USDT and EURT stablecoins from Tether in exchange for Bitcoin collateral.
Celsius Network Alleges Tether’s Predatory Actions Before Bankruptcy
Celsius Network claims that at its financial peak, it owed nearly $2 billion to Tether, secured by sufficient Bitcoin. The lawsuit zeroes in on Tether’s actions during the crucial three months leading up to Celsius’s bankruptcy filing on July 13, 2022.
The bankrupt crypto lender accuses Tether of demanding and acquiring a substantial amount of additional Bitcoin as collateral during this period. This amounted to 15,658.21 Bitcoin, with an extra 2,228.01 Bitcoin securing new loans. Celsius labels these transactions as “Preferential Top-Up Transfers” and “Preferential Cross-Collateralization Transfers,” arguing that Tether unfairly strengthened its position while jeopardizing other creditors.
Celsius Accuses Tether of Forced Liquidation
Celsius Network has escalated its legal battle against Tether, claiming the stablecoin issuer forced a “fire sale” of its Bitcoin collateral. According to the Celsius lawsuit, on June 13, 2022, Tether demanded additional collateral from Celsius, giving the crypto lender only 10 hours to comply.
Despite the contractual timeframe, Tether allegedly seized the entire Bitcoin collateral of 39,542.42 BTC immediately. Celsius terms this action a “Preferential Application Transfer,” arguing that Tether benefited unfairly by liquidating the collateral at a significantly lower market value.
The Celsius lawsuit against Tether further contends that Tether’s breach of contract by ignoring the 10-hour waiting period forced Celsius into a rushed liquidation of its Bitcoin holdings. Tether reportedly valued Bitcoin at $816.82 million, a figure Celsius claims is far below the actual market value of over $2 billion at the time. This, the lawsuit argues, caused substantial financial harm to the bankrupt crypto lender.
Celsius Seeks Return of Bitcoin and Damages from Tether
Celsius Network has expanded its legal claims against Tether, alleging that the stablecoin issuer’s liquidation of its Bitcoin collateral was conducted in an unreasonable and harmful manner. The bankrupt crypto lender argues that the swift sale of such a large amount of Bitcoin should have been spread out over a longer period to maximize its value.
The lawsuit accuses Tether of violating standard market practices by selling the Bitcoin hastily at below-market prices. Celsius contends that this premature liquidation prevented the company from weathering the market crash and benefiting from bankruptcy protections.
As a result, Celsius is seeking to recover the Bitcoin transferred to Tether, declaring the transfer fraudulent and preferential. Additionally, the crypto lender is demanding damages for Tether’s alleged breach of contract. The lawsuit requests a court order for Tether to return the value of the Bitcoin or an equivalent monetary amount.
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