Celsius Sues Tether For $2.3B, Alleging Improper Liquidation of Bitcoin Collateral
On Friday, August 9, 2024, defunct crypto firm Celsius Network filed an adversary complaint in the U.S. Bankruptcy Court for the Southern District of New York against stablecoin provider Tether.
The complaint seeks to claw back more than $2.3 billion worth of bitcoin that Celsius transferred to Tether as collateral for loans in the months leading up to its July 2022 bankruptcy filing.
Celsius claims that Tether improperly liquidated nearly 40,000 bitcoin that Celsius had pledged as collateral. According to the complaint, Tether applied all of Celsius’ collateral – 39,542.42 bitcoin – and paid itself back using that collateral at a time when Celsius was insolvent, constituting a preferential and fraudulent transfer. Celsius also alleges that the liquidation was done at below reasonably equivalent value.
Relying heavily on stablecoins like Tether’s USDT to operate its business, Celsius had borrowed nearly $2 billion from Tether starting in 2020. To secure the loans, Celsius pledged tens of thousands of bitcoin as collateral. However, as the crypto market crashed in mid-2022, Tether demanded additional collateral from Celsius on multiple occasions. According to the complaint, in its final demand in June 2022 Tether gave Celsius only 10 hours to deposit more collateral before liquidating what was already pledged.
Tether disputes Celsius’ allegations, saying in a statement that the bitcoin was liquidated at Celsius’ direction and at market prices in June 2022. Tether claims the lawsuit seeks to improperly impose the costs of Celsius’ mismanagement on Tether. However, Celsius says it was insolvent at the time of the liquidation and is seeking at least $100 million in damages from Tether.
Meanwhile, Celsius emerged from Chapter 11 bankruptcy protection in January. As part of its restructuring, Celsius will distribute more than $3 billion in cryptocurrency and cash to creditors. The firm will also create a new bitcoin mining company.
To maximize recoveries for creditors, Celsius appointed the Blockchain Recovery Investment Consortium, a joint venture between GXD Labs and VanEck.
Please contact BlockTribune for access to a copy of this filing.
