Celsius sues Tether for $2.4bn in bitcoins

Paolo Ardoyno, the head of Tether, called Celsius' lawsuit against his firm a "shameless attempt to steal money" in a social media post. On 9 August, bankrupt cryptocurrency lending platform Celsius filed a lawsuit against Tether, a leader in the stablecoin market, demanding the return of 39,542 bitcoins. These bitcoins were deposited by Celsius as collateral, and they claim Tether sold them at the worst possible moment of the bear market in 2022.

Tether sold the bitcoins to Celsius due to insufficient collateral

The situation is pretty clear from the start. Tether issues USDT loans to select customers who provide excess collateral in bitcoins. If the price of the bitcoin used as collateral falls below a certain level, a margin call occurs and the borrower must increase their collateral or face liquidation. This is standard procedure for such agreements and everyone is familiar with these terms.

Since early 2022, when prices began to decline, Tether has repeatedly asked Celsius to increase its collateral, which the company did in April, May and June, weeks before it went bankrupt in July. This is where the parties' versions diverge. Celsius argues that the bitcoins pledged as collateral should not have been sold as the company tried to raise additional funds to avoid liquidation. Tether, however, claims that the sale of the bitcoins was agreed to by Celsius' CEO at the time, Alex Mashinsky. This is an issue to be decided in court, as the parties have different versions of events.

Mashinski agrees to the sale, but Celsius is demanding a lawsuit

The world's largest issuer of stablecoins, Tether, said it was fully confident it was right, with CEO Paolo Ardoino expressing outrage over what he called an "extortion attempt" by Celsius. The lawsuit claims that Tether is obligated to return bitcoins sold to cover Celsius' position. Ardoyno believes the allegations are baseless and insists that the company firmly believes that its actions and contract are legitimate. "We intend to see this case through and set an example for the entire industry by showing that shameless attempts to misappropriate other people's money will not succeed," he emphasised.

The CEO of Tether assures that his team is confident in dealing with the challenges that have haunted it recently and highlighted the remarkable financial results: "Our primary responsibility is the safety of USDT users. The Tether group, with nearly $12 billion in equity capital, has consistently demonstrated its reliability. We are not afraid of prosecution and are confident that we can prove our case in court."

Celsius, however, has a different point of view. It argues that it should be compensated for its bitcoins, which it believes Tether had no right to sell. Celsius recently filed lawsuits against Badger DAO, Compound Labs and Bancor DAO, seeking to recover funds to pay creditors. All are now awaiting a decision from the U.S. Bankruptcy Court in the Southern District of New York.