Tether (USDT) Issuer Affirms Commitment to “Vigorously” Defend Itself Against Celsius’s Complaint

Celsius sued Tether on August 9, accusing the stablecoin issuer of unlawfully liquidating its Bitcoin collateral to recover an outstanding loan

Bankrupt crypto lender Celsius has sued stablecoin issuer Tether and certain of its affiliates, alleging unlawful liquidation of its Bitcoin collateral to recover an outstanding loan owed by Celsius. The complaint, filed on August 9, also alleges that the stablecoin issuer breached a token agreement signed by the two companies.

Celsius filed for Chapter 11 bankruptcy protection in July last year, owing creditors over $4.7 billion and having a $1.2 billion hole in its balance sheet. The crypto lender had previously touted having over 1.7 million users.

Celsius Accuses Tether of Unlawful Bitcoin Collateral Liquidation

Celsius alleges in the complaint that Tether unlawfully liquidated a portion of the creditor’s Bitcoin collateral on August 11, 2022, to settle an outstanding loan owed by Celsius to the stablecoin issuer. The complaint states:

“The collateral was liquidated without Celsius’ knowledge or consent and in breach of the Token Agreement, which prohibited Tether from unilaterally offsetting any amounts owed by Celsius against the collateral.”

The complaint further alleges that Tether was barred from directly recovering the loan from the Bitcoin collateral under the terms of a loan agreement between the two companies. Instead, it adds, Tether was only permitted to deduct the loan amount from any future minting fees payable to Celsius.

Celsius alleges that the liquidation resulted in a loss of about 2.4094 BTC, valued at roughly $2.4 billion at the time of filing the complaint. The complaint seeks to recover the lost Bitcoin from Tether.

Accusing the stablecoin issuer of fraud, the complaint also alleges that the proceeds from the liquidated Bitcoin were transferred to Tether in a series of “fraudulent transfers” over the Tron blockchain. It adds that the transfers were made to wallets that are not owned or controlled by Celsius.

Tether Terms Celsius Lawsuit ‘Baseless,’ Alleges Misrepresentation

In a response filed with the court on September 22, Tether termed the complaint a “baseless lawsuit” that seeks to “improperly” impose the costs of Celsius’ mismanagement and failure on the stablecoin issuer. It stated:

“The complaint also misrepresents the facts and ignores the numerous defenses that Tether has to the claims asserted against it by Celsius.”

Tether argued that the complaint is “replete with mischaracterizations” of the relevant agreements and events, and that Celsius is attempting to “rewrite history” to support its claims. The stablecoin issuer further stated that the complaint “ignores the clear contractual provisions” that support Tether's actions.

“Celsius is trying to use this litigation to avoid the consequences of its own misconduct and to shift blame for its failure to Tether,” the response added.

Meanwhile, Tether CEO Paolo Ardoino expressed confidence that the company will win the lawsuit, adding that there are “plenty of flaws in the claimant's filing.” He stated:

“Celsius is trying very hard to shift the blame for their mismanagement onto Tether. We are sure that the truth will come out and we will win this case. Plenty of flaws in the claimant’s filing.”

Separately, Ardoino clarified that the lawsuit will not impact USDT holders. “Celsius is trying to shift the blame for their mismanagement onto Tether. We are sure that the truth will come out and we will win this case,” he noted in a tweet.