Tether vs. Celsius Lawsuit: A Battle Over Bitcoin Liquidation

Tether Limited has strongly rebutted a lawsuit filed by the defunct cryptocurrency lender Celsius Network, labeling the legal action as a “shakedown” and “baseless.” The suit, initiated on August 9 in the U.S. Bankruptcy Court for the Southern District of New York, demands the recovery of approximately $2.4 billion in Bitcoin allegedly improperly liquidated by Tether prior to Celsius’s bankruptcy.

Background of the Dispute

Celsius claims that Tether improperly liquidated Bitcoin holdings that were meant as collateral under the terms of their 2022 agreement. According to Celsius, this action was taken without providing the contractually obligated timeframe for additional collateral deposit, thereby exacerbating Celsius’s financial collapse.

Tether’s Defense

In response, Tether maintains that it acted within the legal bounds of the agreement, asserting that the liquidation occurred only after Celsius failed to meet the required collateral thresholds as Bitcoin prices fell. Tether’s official statement argued that the liquidation was conducted “at Celsius’ direction and with Celsius’ consent,” emphasizing that the lawsuit misrepresents the circumstances leading to the financial dispute.

Legal and Financial Implications

Tether criticizes the lawsuit for what it sees as a misapplication of the law and questions the jurisdictional basis of the claims. The company reassured its stakeholders of its robust financial health, citing $12 billion in consolidated equity as of the end of June 2024. Tether expressed confidence in addressing these allegations in court, dismissing the lawsuit as beneficial only to the legal and financial consultants involved.

Celsius’s Position and Financial Struggles

On the other side, Celsius highlights procedural discrepancies in how Tether executed the liquidation, specifically the lack of a sufficient timeframe to post additional collateral. The collapse of Celsius was a significant event in the cryptocurrency sector in 2022, with the company declaring bankruptcy amid liabilities surpassing assets by $1.2 billion. Since then, efforts to restructure and address creditor claims have been ongoing, including a $2 billion restructuring plan approved late last year.

A Contentious Legal Battle Ahead

The lawsuit between Tether and Celsius Network marks another chapter in the complex and often tumultuous world of cryptocurrency finance. As both parties prepare for their legal confrontations, the broader crypto community watches closely, aware that the outcome could have far-reaching implications for industry practices and investor confidence.