The Legal Battle Between Celsius and Tether: An In-depth Analysis

Celsius, a crypto lender that filed for bankruptcy two years ago, has recently taken legal action against Tether for an alleged mishandling of over $800 million worth of BTC during a market downturn in mid-2022. The lawsuit claims that Tether violated a contract with Celsius, resulting in the liquidation of collateral that belonged to the lender.

According to the lawsuit, Tether requested additional collateral from Celsius during a bear market in 2022, leading to the liquidation of over 16,700 BTC. This action, described as “Preferential Top-Up Transfers” and “Preferential Cross-Collateralization Transfers,” supposedly favored Tether over other creditors. In response, Tether called the lawsuit a “baseless shakedown” and defended its actions as necessary to protect its own interests.

The legal dispute between Celsius and Tether began with a loan agreement in 2020, which allowed Celsius to borrow USDT and EURT using bitcoin as collateral. However, when the price of BTC plummeted in mid-2022, Tether demanded additional collateral from Celsius. Despite the lender being entitled to a ten-hour grace period to deposit the funds, Tether allegedly proceeded with liquidating Celsius’s entire collateral without waiting for the deadline.

Paolo Ardoino, the CEO of Tether, stated that the stablecoin issuer only liquidated Celsius’s collateral after being instructed to do so by the lender. Ardoino emphasized that Tether acted in accordance with the terms of the contract and returned any excess funds to Celsius. He dismissed the lawsuit as unfounded and expressed confidence in the legality of Tether’s actions.

The outcome of the legal battle between Celsius and Tether remains uncertain, with both parties standing firm in their positions. While Tether has assured its token holders that the lawsuit will not impact them, the case highlights the complexities and risks involved in the cryptocurrency lending market. Ultimately, the resolution of this dispute will likely have broader implications for the legal frameworks governing such transactions in the future.