Tether Limited has mounted a vigorous defense in response to a lawsuit filed by Celsius Network, which Tether has dismissed as both unfounded and an attempt at intimidation. The clash between the two firms comes into sharp relief with Tether’s strong condemnation of claims surrounding the disputed liquidation of nearly $2.4 billion worth of Bitcoin.
The legal action, initiated on August 9 in the U.S. Bankruptcy Court for the Southern District of New York, demands the recovery of Bitcoin assets that Celsius alleges were improperly liquidated by Tether in the lead-up to its bankruptcy over two years prior. Celsius, once a significant player in the cryptocurrency lending space, finds itself grappling with the consequences of its financial unraveling.
In a stern rebuke to the lawsuit’s allegations, Tether articulated its stance through a statement on its website last Friday, asserting its intention to contest what it perceives as a meritless challenge. The dispute centers on a 2022 agreement that, according to Tether, mandated Celsius to furnish additional Bitcoin as collateral in the event of a price decline — a condition Celsius reportedly failed to meet, prompting Tether to liquidate Bitcoin holdings to settle an $815 million debt at Celsius’s behest.
Tether’s narrative firmly places the responsibility for the fallout on Celsius’s management failures, suggesting the lawsuit aims to unjustly transfer these failures onto Tether. Echoing its initial dismissal, the stablecoin issuer also raised questions about the lawsuit’s legal basis and jurisdictional validity, reassuring investors of its robust financial health with a reported $12 billion in consolidated equity as of June 30.
For Celsius’s part, the company has argued that Tether proceeded with the liquidation without providing the agreed-upon window of time to post additional collateral, thereby exacerbating Celsius’s financial woes. The aftermath of Celsius’s bankruptcy in July 2022 laid bare the profound impact of its collapse on the wider crypto ecosystem, highlighting a staggering $5.5 billion in liabilities.
The legal entanglements extend beyond the bankruptcy aftermath, with Celsius’s former CEO facing criminal and civil actions. Nonetheless, a pathway for recovery appeared with the creditor’s approval of a $2 billion restructuring plan, marking a concerted effort to navigate Celsius out of financial jeopardy.
This ongoing legal dispute underscores the volatile and often precarious nature of the cryptocurrency market, with significant implications for stakeholders ranging from investors to legal practitioners. As the case progresses, the broader financial community will be watching closely, gauging the ramifications for market stability and regulatory oversight in the digital asset space.