The cryptocurrency industry has been rocked by a series of high-profile legal battles, and the latest tussle involves two major players – Tether, the issuer of the world’s largest stablecoin USDT, and the bankrupt crypto lending platform Celsius Network. At the heart of this dispute lies a contentious claim over the alleged improper liquidation of Bitcoin (BTC) collateral, with Celsius seeking to recover a staggering $3.3 billion in assets.
The Celsius Lawsuit Against Tether
In a dramatic turn of events, Celsius Network, the embattled Celsius crypto lender that filed for Chapter 11 bankruptcy in July 2022, has filed a lawsuit against Tether crypto in the U.S. Bankruptcy Court for the Southern District of New York. The lawsuit alleges that Tether engaged in “preferential transfers and fraudulent transfers” of 428.64 Bitcoin collateral in the months leading up to Celsius’ bankruptcy filing.
According to the court filing, Celsius claims that Tether wrongfully liquidated approximately 57,428.64 BTC, worth an estimated $3.3 billion at current Bitcoin today prices. Celsius argues that Tether’s actions were driven by a desire to insulate itself from the impending bankruptcy, demanding and receiving “a significant amount of new, incremental collateral” to improve its financial position.
The lawsuit further alleges that Tether sold the Bitcoin collateral at an average price of $20,656.88 per BTC, which Celsius contends was “considerably below Bitcoin’s low price of $22,808 on Bitfinex,” a crypto platform controlled by Tether’s parent company. Celsius maintains that if given the full 10-hour timeframe stipulated in the loan agreement, it could have provided the necessary additional collateral to avoid the liquidation of its Bitcoin holdings at “near the bottom of the crypto market news.”
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Tether’s Vehement Denial and Defense
Tether coin, the stablecoin provider, has vehemently rejected the allegations made by Celsius in the court Celsius BTC case, describing the Celsius sue lawsuit as a “shakedown” and “baseless.” The Tether USDT news firmly states that it will “vigorously defend” itself against what it considers to be “unwarranted allegations.”
In a statement on its website, Tether claimed that the Bitcoin collateral was liquidated at Celsius’ direction and with Celsius’ consent, as per the terms of the 2022 agreement between the two entities. According to Tether, when the market crash occurred, the agreement required Celsius to post additional collateral to avoid the liquidation of its BTC on the Bitcoin networks. However, when Celsius chose not to provide the necessary collateral, it directed Tether to liquidate the collateral it held.
Tether’s CEO, Paolo Ardoino, echoed this sentiment on social media, asserting that “there are plenty of flaws in the claimant’s filing” and that Tether is “very confident in the solidity of our contract and our actions.” Tether has maintained that it acted within the bounds of the agreement and that the Celsius litigation is an attempt to shift the burden of Celsius’ financial troubles onto the stablecoin provider.
The Broader Implications of the Dispute
The outcome of this legal battle, the Bitcoin dispute between Tether betting and Celsius, could have far-reaching implications for the cryptocurrency industry. If Celsius were to prevail, it could set a precedent for how digital coins are treated in bankruptcy proceedings, potentially leading to more stringent regulations and oversight.
However, Tether appears confident in its legal position, noting that its consolidated equity was nearly $12 billion as of June 2022. The company has asserted that even in the unlikely scenario where the lawsuit succeeds, Tether app users and token holders will not be impacted, as the stablecoin provider’s financial stability would remain unaffected.
Brock Pierce’s Entanglement in Legal Disputes
Adding to the complexity of the situation is the involvement of Brock Pierce, a co-founder of Tether and a prominent figure in the cryptocurrency industry. Pierce, who once had an estimated net worth of around $1 billion, has encountered his own set of legal challenges in Puerto Rico, where he had ambitious plans to transform the island into a crypto-friendly haven, including sports betting Tether initiatives.
Pierce’s efforts to restore the W Hotel on the island of Vieques, a project he had envisioned as a centerpiece of his crypto-focused initiatives, have been mired in legal disputes with former business partners. These disputes have not only cast a shadow over Pierce’s reputation but have also raised questions about the viability of his broader plans for Puerto Rico.
Conclusion
The Tether-Celsius legal battle is a complex and high-stakes dispute that underscores the challenges and risks inherent in the rapidly evolving cryptocurrency industry. As the case unfolds, it will likely provide valuable insights into the intersection of traditional legal principles and the unique characteristics of digital coins.
For industry players, this saga serves as a stark reminder of the importance of robust risk management, clear contractual agreements, and transparency. Navigating the crypto landscape requires a delicate balance of innovation, accountability, and collaboration with regulators to build a more resilient and trusted ecosystem.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial advice. Investing in cryptocurrencies involves risks, and readers should conduct their own research and consult with financial advisors before making investment decisions. Hash Herald is not responsible for any profits or losses in the process.
