Celsius Network Files Lawsuit Against Tether to Recover Billions

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Celsius Network, a once-renowned digital asset platform, has initiated a lawsuit against Tether and its affiliated entities. According to the filing, Celsius accused the stablecoin issuer of engaging in fraudulent Bitcoin (BTC) transfers totaling over $2 billion. 

The legal action, filed in federal bankruptcy court, comes amid allegations that Tether breached contractual obligations and liquidated Bitcoin assets, causing Celsius Network significant financial harm.

Celsius Says Tether Acted Unreasonably

Celsius entered into a loan agreement with Tether in 2020. In 2021, Tether lent Celsius about $1 billion at an interest rate between 5% and 6%, with Bitcoin as collateral. In total, the company had borrowed almost $2 billion in USDT. 

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According to the complaint, Celsius asserts that Tether acted in bad faith by hastily liquidating a substantial amount of Bitcoin, which allegedly violated the terms of their agreement. This liquidation, Celsius claims, occurred during a critical period leading up to its bankruptcy, exacerbating the financial difficulties that ultimately led to the firm’s downfall. 

The lawsuit seeks to recover the lost Bitcoin, which Celsius argues was improperly taken due to Tether’s actions.  The embattled crypto lender claimed it was robbed of its remaining BTC at a low market value. As per the filing, the USDT issuer sold the BTC at an average price of $20,656.88 each, below the market closing BTC price of $22,487.39 on that date.

Furthermore, Celsius plans to seek compensation for the contract breach. As such, it requests the court to direct Tether to return the value of the BTC or an equivalent amount as compensation. However, Tether and its CEO Paulo Ardoino have responded to the lawsuit in a post on X. Tether confirmed its commitment to defending itself against the Celsius lawsuit.

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Celsius Network Files for Bankruptcy Protection

Recall that Celsius Network filed for bankruptcy in the United States Bankruptcy Court for the Southern District of New York in July 2022 alongside other top crypto projects like Three Arrows Capital (3AC), Babel Finance, and Hodlnaut. Their challenges were contributed by the unfortunate crash of TerraUSD and LUNA, which drained the entire crypto industry of almost $2 trillion.

Amidst its bankruptcy proceedings, the firm sought favorable settlements for its creditors. This led to a proposal to resolve claims from customers who alleged fraud by increasing recoveries by 5%. In the long run, creditors voted in favor of a proposal that requires Celsius debtors to return $2 billion worth of Bitcoin (BTC) and Ethereum (ETH) to the exchange’s creditors.

Celsius Officially Exits Bankruptcy

In February, the bankrupt crypto lending platform officially exited bankruptcy and is set to return over $3 billion in crypto and fiat to its users affected by the firm’s sudden halting of withdrawals announced in 2022. As reported by TheCoinRise, Celsius’s exit from bankruptcy saw the creation of a new Bitcoin mining company managed by crypto mining firm Hut 8 called Ionic Digital, Inc.

Celsius added that the new Bitcoin mining firm will “continue to deliver recoveries to creditors” and that its stock is “expected to be publicly traded once the requisite approvals are received.” Furthermore, Celsius said it increased the amount of crypto available for distribution to creditors by $250 million by “converting altcoins to BTC or ETH and through previous settlements.”

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