Tether, the issuer of the world’s largest stablecoin, USDT, said it plans to defend itself against what it calls “shakedown” litigation brought by the bankrupt crypto lender Celsius.
The lawsuit, filed in the U.S. Bankruptcy Court of the Southern District of New York, demands that Tether either return 57,428.64 Bitcoin (BTC) or pay the equivalent value, amounting to approximately $3.3 billion at current prices.
Celsius alleges that Tether made “preferential and fraudulent transfers” of Bitcoin during the market downturn in mid-2022, just before Celsius filed for bankruptcy. According to the lawsuit, Tether demanded and received additional collateral from Celsius to secure its position, which Celsius argues was done to shield Tether from the impending bankruptcy.
Tether, however, disputes these claims, stating that the Bitcoin was liquidated at Celsius’ direction and with its consent at June 2022 prices. Tether CEO Paolo Ardoino responded to the lawsuit on X, asserting that the legal action is baseless and that Tether’s actions were in full compliance with their contract. He added that Tether will fight the lawsuit “till the end” to set an example against what he describes as “shameless money grabs.”
Celsius also seeks $100 million in damages for alleged breaches of contract, claiming that Tether applied Celsius’ Bitcoin collateral at a lower-than-market value, which they argue should be recovered for the benefit of Celsius’ estate.
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Tether, on the other hand, claims that its financial position remains strong, with consolidated equity of nearly $12 billion as of June 30, assuring that Tether token holders will not be impacted by the lawsuit.
Last year, Tether dismissed reports suggesting that it received a $2 billion loan from the bankrupt cryptocurrency lender Celsius. At the time, Paolo Ardoino responded to the Celsius examiner’s report that claims the USDT issuer borrowed money from the troubled lender, alongside Three Arrows Capital and Alameda Research.
The report by former prosecutor Shoba Pillay notes that Celsius notionally had credit limits for its borrowers, but Alameda, Tether, 3AC and others all exceeded those ‘limits’. Tether’s peak borrowing from Celsius was $2 billion and was considered an “existential risk” internally at Celsius.
The report specifically mentioned Celsius’s loans to Tether as twice its credit limit, adding that the lender wouldn’t survive a Tether default. “The Tether exposure eventually grew to over $2 billion -a number so large that in late September 2021, that exposure was described to the Risk Committee as present[ing] an ‘existential threat’ to Celsius,” it further reads.
CIO Ardoino suggested that the document either made a typographical error or a mischaracterization, actually meaning “Celsius loans from Tether” instead of “Celsius loans to Tether.”
Tether said the loan taken out by embattled crypto lender Celsius has been fully liquidated without a loss.
According to the statement, Tether’s lending activity with Celsius had always been overcollateralized as with any other borrower and has no impact on the company’s reserves. The announcement also described the decision to liquidate the collateral to cover the loan as a part of the original terms of the agreement between the two entities. Tether also said it reconfirmed these terms with Celsius in writing before the start of the liquidation event.
While Tether’s portfolio did include an investment in Celsius, the issuer said it represents a minimal part of its shareholder’s equity and there was no correlation between this investment and USDT reserves.
