Celsius Sues Tether Over $2 Billion Worth of Fraudulent Bitcoin Transfers

• In a recent legal move, Celsius Network Ltd. has filed a lawsuit against Tether and its associated entities.
• The lawsuit alleges that over $2 billion worth of “fraudulent” and “preferential” Bitcoin transfers took place involving USDT.
• The lawsuit, presented in a federal bankruptcy court, aims to recover the lost Bitcoin, claiming Tether’s actions harmed Celsius.

Discover the details of a major lawsuit filed by Celsius Network against Tether, alleging substantial Bitcoin mismanagement, and the implications it has on the crypto lending landscape.

Lawsuit Highlights Alleged Misconduct by Tether

The embattled crypto lending platform Celsius entered into a significant credit agreement with Tether Limited back in 2020. This arrangement enabled Celsius to borrow large volumes of stablecoins, mainly Tether (USDT) and Euro Tether (EURT), at low interest rates. In exchange, Celsius provided substantial collateral, including large quantities of Bitcoin.

Details of the Alleged Transactions

At its peak, Celsius had borrowed approximately $2 billion in USDT from Tether, secured by tens of thousands of Bitcoin. The lawsuit concentrates on the ninety-day period leading up to Celsius’s bankruptcy filing on July 13, 2022. During this period, Tether allegedly demanded and received a significant amount of new collateral from Celsius, summing up to 15,658.21 Bitcoin, and additionally secured new borrowings with an extra 2,228.01 BTC. These actions, referred to as “Preferential Top-Up Transfers” and “Preferential Cross-Collateral Transfers,” allegedly unfairly advantaged Tether over other creditors.

“Preferential Application Transfers” and Contract Breach

On June 13, 2022, Tether made a final demand for additional collateral, giving Celsius just ten hours to respond, as per their contract. Yet, Tether reportedly disregarded this time frame and immediately executed the seizure of 39,542.42 BTC, labeled as a “Preferential Application Transfer.” It’s claimed that this enabled Tether to offset its exposure while effectively “stealing” the Bitcoin from the insolvent Celsius at a depressed market value. The lawsuit underscores that Tether breached the contract’s stipulated wait time and eventually “fire sold” the 39,542.42 Bitcoin, which then valued at $816.82 million, far below its current $2 billion worth, causing Celsius substantial financial harm. Tether’s court filing dated August 9 showed the Bitcoin was sold at an average price significantly lower than its market closing price.

Recovery Efforts by Celsius

The lawsuit claims that Tether’s liquidation of Celsius’s Bitcoin was commercially unreasonable. Standard market practices advocate for selling such a large BTC block over an extended period to minimize price impact and maximize pricing, which Tether allegedly did not follow. Moreover, the early liquidation is described to have prevented Celsius from withstanding the market downturn and edged out any chance to counteract due to the automatic stay in bankruptcy.

Conclusion

In sum, the lawsuit aims to rescind the preferential and fraudulent transfers of Bitcoin and seek compensation for the alleged breach of contract by Tether. Celsius is asking the court to mandate Tether to repay either the value of the Bitcoin or an equivalent amount in compensation. This litigation underscores the critical need for transparency and adherence to contractual terms in the crypto lending space.