Celsius Network Seeks to Recover Billions in Bitcoin From Tether

Celsius Network Ltd. seeks to recover billions in Bitcoin from USDT issuer Tether and its affiliated entities, the bankrupt crypto lender said in a new court filing.

Celsius Network Ltd. is suing USDT issuer Tether and its affiliated entities to recover billions in Bitcoin, the bankrupt crypto lender said in a new court filing.

The lawsuit alleges that Tether breached its token agreement with Celsius when it applied the company’s property (Bitcoin) held as collateral to pay itself for Celsius’s outstanding loan. Celsius claims this occurred during the ninety days before it filed for bankruptcy on July 13, 2022.

The Token Agreement

Celsius and Tether signed the token agreement in February 2020 to allow the crypto lender to borrow USDT from the company by posting collateral in Ether, Tether Gold, or Bitcoin, according to the complaint.

The parties amended the agreement in January 2022 and introduced a requirement that mandated Tether to send a notice of a collateral demand to Celsius if the company’s collateral fell below a specified threshold. The agreement provided Celsius ten hours to satisfy the collateral demand.

Celsius said it borrowed 512,330,000 USDT from Tether under the amended token agreement and posted 16,505.17 BTC as collateral to secure the loan.

As Bitcoin’s price began to fall in April 22, Tether initiated several demands under the amended token agreement to improve its security on the antecedent debt owed to it by Celsius, the filing states. The crypto lender responded by depositing 16,737.27 Bitcoin as additional collateral, which it alleges was not held in segregated wallets or accounts.

While Celsius later borrowed more USDT from Tether and posted respective collaterals in Bitcoin, things went south on June 12, 2022, when Tether issued new demands for additional collateral.

Celsius Seeks $2B Clawback

Celsius claims that Tether sent the first demand late at night (Eastern time) on June 12, which was fulfilled by a transfer of 3,041.73 Bitcoin to the stablecoin issuer the following day. Several hours later, Tether reportedly made a second collateral demand to Celsius and “demanded immediate payment.”

This was contrary to the token agreement the two companies had signed.

Tether allegedly applied the entirety of Celsius’s collateral, 39,542.42 Bitcoin, at a dollar value of $816,822,948.

The contested Bitcoin is worth over $2 billion at current market prices.

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