Celsius Network Ltd. has filed a lawsuit against Tether and its related companies. The lawsuit claims that Tether made “fraudulent” and “unfair” transfers of Bitcoin (BTC) worth over $2 billion today. The case, filed in federal bankruptcy court, aims to recover the lost Bitcoin that Celsius believes was wrongly taken during a crucial time before the company went bankrupt.
Celsius Network, a well-known crypto lender, had a loan agreement with Tether Ltd. in 2020. This deal allowed Celsius to borrow stablecoins, like USDT and Euro Tether (EURT), at low-interest rates. In exchange, Celsius provided significant collateral, including Bitcoin, to secure these loans. At its peak, the company had borrowed nearly $2 billion in USDT, backed by tens of thousands of BTC. The lawsuit targets actions taken by Tether during the ninety days before Celsius filed for bankruptcy on July 13, 2022.
The complaint states that Tether demanded and received large amounts of new collateral from Celsius, totaling 15,658.21 Bitcoin, and secured additional loans with another 2,228.01 BTC. These actions, labeled as “Preferential Top-Up Transfers” and “Preferential Cross-Collateralization Transfers,” are claimed to have unfairly benefited Tether at the cost of other creditors.
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Celsius Claims Tether’s Actions Led to Massive Losses
On June 13, 2022, Tether made a final demand for more collateral from Celsius. According to their agreement, Celsius had 10 hours to respond, but Tether immediately applied all of Celsius Network’s collateral 39,542.42 BTC without waiting.
This action, called the “Preferential Application Transfer,” allegedly allowed Tether to protect itself but left Celsius “robbed” of its remaining Bitcoin at a low market value. The lawsuit also claims that Tether’s breach of the 10-hour waiting period led to a rushed sale of Celsius Network’s Bitcoin, with all 39,542.42 BTC used to pay off Celsius’s debt. Tether valued the Bitcoin at $816.82 million, far below its current worth of over $2 billion.
This caused significant financial harm to Celsius. The court filing from August 9 states that Tether sold this Bitcoin at an average price of $20,656.88 each, much lower than the market closing price of $22,487.39 on that day.
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Impact of Hasty Liquidation on Celsius Network
The lawsuit also argues that Tether’s liquidation of Celsius’ Bitcoin was not done in a commercially reasonable manner. The complaint points out that standard market practices suggest that selling such a large amount of BTC should be done gradually to avoid impacting the price and to secure better rates.
Instead, Tether allegedly violated these practices by selling the Bitcoin quickly and at lower-than-market prices. This hasty liquidation prevented Celsius from surviving the market downturn and stopped the automatic stay of bankruptcy from taking effect.
As a result, the lawsuit seeks to “recover” the Bitcoin transfers that were claimed to be preferential and fraudulent. Celsius also wants to claim damages for the alleged breach of contract. The bankrupt estate is asking the court to order Tether to return the value of the Bitcoin or pay an equivalent amount in damages.
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