World’s largest stablecoin issuer, Tether dismissed reports suggesting that it received a $2 billion loan from the bankrupt cryptocurrency lender Celsius.
In a Twitter thread, Tether’s chief technology officer 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.”
“The examiner’s report above describes Celsius having ‘loans’ to Tether, but I think the exposure comes from Celsius having posted collateral in excess of the amounts it borrowed from Tether,” he added.
Earlier in July, 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 does 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.
At the time, Tether also issued a response to a surfaced report suggesting that it has lending exposure to Three Arrows Capital. It denied the rumors, even accusing the authors of unethical motivations.
