Celsius Network Ltd. has filed a lawsuit against Tether and its affiliated entities. The lawsuit alleges that the USDT issued conducted “fraudulent” and “preferential” transfers of Bitcoin (BTC) amounting to over $2 billion today. The complaint, lodged in federal bankruptcy court, seeks to reclaim the collapsed estate’s lost Bitcoin due to Tether’s actions during a critical period leading up to the firm’s bankruptcy.
Celsius’ Allegations Against Tether
Celsius, a prominent crypto lender, entered into a loan agreement with Tether Limited in 2020. This arrangement allowed the lender to borrow stablecoins, specifically Tether (USDT) and Euro Tether (EURT), at low-interest rates. In return, the crypto lender posted substantial collateral, including Bitcoin, to secure these loans.
At its peak, the firm had borrowed nearly $2 billion in USDT from Tether, backed by tens of thousands of Bitcoin. The lawsuit focuses on actions taken by Tether during the ninety-day period before Celsius filed for bankruptcy on July 13, 2022.
According to the complaint, the USDT issuer demanded and received significant amounts of new collateral from the crypto lender. This totaled 15,658.21 Bitcoin, and further secured new borrowings with an additional 2,228.01 BTC. These actions, characterized as “Preferential Top-Up Transfers” and “Preferential Cross-Collateralization Transfers,” are claimed to have unfairly improved Tether’s position at the expense of other creditors.
Preferential Application Transfer & Breach of Contract
On June 13, 2022, Tether issued a final demand for additional collateral. The crypto lender, in accordance with their agreement, had ten hours to respond. However, stablecoin issuer proceeded to apply the entirety of Celsius’ collateral, i.e., 39,542.42 BTC immediately, without granting the contractually stipulated time.
This action, referred to as the “Preferential Application Transfer,” allegedly allowed Tether to cover its exposure. However, the bankrupt crypto lender was “robbed” of its remaining BTC at a low market value.
Moreover, the lawsuit argues that Tether’s breach of the contract’s 10-hour waiting period resulted in a “fire sale” of the now-bankrupt estate’s Bitcoin, with all 39,542.42 Bitcoin applied against Celsius’ outstanding debt. Tether’s valuation of BTC at $816.82 million is significantly less than its current worth of more than $2 billion.
This caused substantial financial damage to thr crypto lender. The court filing dated August 9 states that Tether sold this Bitcoin at an average price of $20,656.88 each, notably below the market closing BTC price of $22,487.39 on that date.
Kritika Mehta
Kritika boasts over 2 years of experience in the financial news sector. Currently working as a crypto journalist at Coingape, she has consistently shown a knack for blockchain technology and cryptocurrencies. Kritika combines insightful analysis with a deep understanding of market trends. With a keen interest in technical analysis, she brings a nuanced perspective to her reporting, exploring the intersection of finance, technology, and emerging trends in the crypto space.
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