Celsius Sues Tether, Alleging the Stablecoin Issuer Unlawfully Sold $2.4B in Bitcoin as the Crypto Lender Began to Collapse

Tether is now included in the list of targets of Celsius lawsuits, which also includes Badger DAO, Compound Labs, and Bancor DAO.

bankrupt crypto lender Celsius filed a lawsuit against Tether on Friday, seeking to recover $2.4 billion in Bitcoin that Celsius alleges Tether unlawfully sold at the bottom of the market as the crypto lender began to collapse.

Tether joins the list of entities being sued by Celsius, including Badger DAO, Compound Labs, and Bancor DAO, among others. Badger DAO is being sued for losses incurred in its 2021 hack, Compound Labs for losses related to a November 2020 oracle incident, and Bancor DAO, which is owned by the niece and nephew of Israeli Prime Minister Benjamin Netanyahu, among others, for additional losses.

Celsius’s lawsuits against the other DAOs are more general claims of mismanagement leading to losses, while the lawsuit against Tether is the latest in a series of legal actions intended to recoup withdrawals and preferential payments made by Celsius in the critical 90-day period prior to its insolvency. Tether has flatly denied any wrongdoing in a blog post, calling the lawsuit “Shake Down litigation.”

In the largest of the lawsuits filed on Friday, Celsius claims that 39,542 bitcoin, now worth more than $2.4 billion, were pledged as collateral for loans that Celsius obtained from Tether, the world’s largest stablecoin issuer. When prices began to fall in early 2022, Tether asked Celsius for more collateral to back its loans. The lender sent the stablecoin multiple tranches of bitcoin collateral throughout May and June. Celsius also secured an additional $300 million in loans from the stablecoin issuer in April 2022, which were transacted within 90 days of Celsius’s bankruptcy filing in July of that year.

The complaint argues that “Tether would have had nearly $350 million less in collateral” and that “Tether would not have been able to come close to bringing itself whole on its $812,330,000 USDT loan to Celsius” if the transfers had not occurred.

After Celsius fulfilled Tether’s request for an additional 3,000 bitcoin in collateral on June 12, 2022 (then-equivalent to about $350 million), the stablecoin issuer made a second collateral demand, according to the lawsuit. While Celsius was allegedly still gathering the funds during a contractually mandated 10-hour waiting period, Tether moved to swiftly liquidate Celsius’s entire collateral of 39,542 bitcoin within hours, the lawsuit claims.

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