The Lawsuit Between Celsius and Tether: An Analysis

The Lawsuit Between Celsius and Tether: An Analysis

Celsius, a company that filed for bankruptcy two years ago, is now suing Tether for what they claim was the wrongful liquidation of over $800 million worth of BTC. According to the lawsuit filed in the US Bankruptcy Court for the Southern District of New York, Celsius alleges that Tether violated their contract by unfairly liquidating their collateral during a bear market in mid-2022. Celsius had entered into a loan agreement with Tether in 2020, allowing them to borrow USDT and EURT by posting BTC as collateral at low interest rates.

Tether quickly responded to the lawsuit, calling it a “baseless shakedown” and stating that they would fight against it. Tether claims that they provided USDT to Celsius with an overcollateralization in Bitcoin and had the right to liquidate Celsius’s position when the collateral fell below the margin call price. According to Tether’s CEO, Paolo Ardoino, Celsius instructed Tether to sell the Bitcoin held as collateral once BTC’s price dropped in 2022, and Tether managed to return the excess to Celsius.

The lawsuit alleges that Tether did not wait for the ten-hour deadline for additional collateral as stipulated in the Token Agreement between the two parties. Instead, Tether moved forward with liquidating Celsius’s entire collateral, totaling over 39,000 BTC. Celsius claims that this action unfairly improved Tether’s position as a creditor and destroyed Celsius’s residual interest in the collateral. Tether, on the other hand, argues that Celsius instructed them to sell the Bitcoin and that they acted within their rights to liquidate the position.

While Celsius maintains that Tether unfairly liquidated their collateral, Tether asserts that they followed Celsius’s instructions and returned the excess collateral. The two parties are at odds over the events that transpired during the bear market in mid-2022, with each side presenting conflicting claims. Celsius accuses Tether of engaging in “baseless” actions, while Tether defends its actions as being in accordance with the terms of their agreement.

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The lawsuit between Celsius and Tether raises questions about the transparency and accountability of stablecoin issuers. As the cryptocurrency industry continues to evolve, disputes like these highlight the need for clear agreements and communication between parties. The outcome of this legal battle could have far-reaching implications for other companies in the sector and may shape future lending and collateral practices.

The lawsuit between Celsius and Tether underscores the complex nature of relationships within the crypto industry. With both parties presenting conflicting claims, it remains to be seen how the legal proceedings will unfold. Regardless of the outcome, this case serves as a reminder of the importance of clear contractual terms and adherence to agreements in the fast-paced world of cryptocurrency.

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