The cryptocurrency industry has seen its fair share of legal battles, and the most recent high-profile dispute in the cryptocurrency industry involved struggling companies. Centennial In a surprising turn of events, Celsius has filed a lawsuit against Tether in U.S. bankruptcy court, accusing it of misappropriating its assets and seeking nearly $2.4 billion in BTC proceeds, damages, and legal fees. The legal standoff highlights the complex and often contentious relationships within the cryptocurrency ecosystem.
Celsius’s claims against Tether
According to the lawsuit filed by Celsius, the two parties entered into a loan agreement in 2022, whereby Tether provided Celsius with a specified amount of USDT stablecoin in exchange for 39,542.42 BTC as collateral for Bitcoin. As the price of Bitcoin began to decline, Celsius was required to provide additional collateral to avoid liquidation and meet margin requirements, in accordance with the contractual obligations of the agreement.
Celsius alleges that Tether liquidated its BTC collateral at a price that nearly covered the debt, without giving Celsius the opportunity to offer additional collateral. The lawsuit alleges that Tether’s actions were a breach of its contract and resulted in significant losses for Celsius, contributing to its financial turmoil. Celsius is seeking compensation for its creditors through this legal action.
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Tether’s response: “Blackmail” attempt
Tether, on the other hand, has vehemently denied any wrongdoing and called the lawsuit an “extortion” attempt by Celsius. The company maintains that Celsius ordered the sale of the bitcoin collateral after it chose not to provide additional collateral as required under the agreement.
In a blog post, Tether’s CTO Paolo Ardoino stated that “when Celsius chose not to deploy further BTC, it directed Tether to liquidate the BTC collateral held by Tether in order to close out its ~$815 million position with Tether.” Tether also emphasized its strong financial position, with ~$12 billion in consolidated equity, to reassure USDT holders that they would not be impacted even if the “baseless lawsuit” proceeds.
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Celsius Sues Tether: Compensation Amount Disputed
The exact amount Celsius is seeking in the lawsuit appears to be a point of contention. While Tether cited the $2.4 billion figure, which represents 39,542.42 BTC, the legal filing shows that Celsius is also seeking to recover two other BTC transfers made during the same period, which it claims were fraudulent or preferential transfers.
In total, Celsius is reportedly seeking to forfeit 57,428.64 BTC, which at the current market price of $60,627 per BTC is worth roughly $3.48 billion. Additionally, the lawsuit seeks at least $100 million in damages, plus additional damages to be determined at trial, and legal fees.
Celsius wider legal attack
The lawsuit against Tether is just one of several legal actions taken by Celsius in recent weeks. The bankrupt crypto lending company has also filed lawsuits against other crypto entities, including Badger DAO, Compound, Bancor DAO, and others.
The lawsuits target a variety of issues, from alleged mismanagement leading to losses to mishandling of collateral and liquidation, and Celsius appears to be pulling out all the stops in its efforts to recover money for its creditors, even if it means taking on some of the biggest players in the industry.
Impacts on the Crypto Industry
The legal battle between Celsius and Tether has far-reaching implications for the broader cryptocurrency industry. The outcome of this case could set important precedents regarding the responsibilities and obligations of crypto lenders, stablecoin issuers, and other major players in the ecosystem.
Furthermore, the lawsuit highlights the risks and complexities inherent in the rapidly evolving cryptocurrency landscape. As the industry continues to mature, the need for robust regulatory frameworks and transparent, accountable market practices becomes increasingly apparent.
Tether’s defensive stance
Tether has made it clear that it will vigorously defend itself against Celsius’ “unfounded allegations.” The company has emphasized its strong financial position and expressed confidence in its ability to prevail in the lawsuit.
However, the lawsuit has the potential to put Tether’s operations and reputation under intense scrutiny. As the world’s largest stablecoin issuer, Tether’s actions and practices are closely monitored, and any missteps could have far-reaching consequences for the entire cryptocurrency market and the security of stablecoins.
Celsius Bankruptcy Proceedings
It’s worth noting that Celsius’ lawsuit against Tether is just one aspect of the broader Celsius bankruptcy case. The crypto lending company filed for Chapter 11 bankruptcy in July 2022, and its restructuring efforts have been closely watched by the industry.
As part of its bankruptcy proceedings, Celsius has already reached a settlement with one of its former executives, Jason Stone, and has been working with the Blockchain Recovery Investment Consortium to liquidate several tokens and non-fungible tokens (NFTs) to distribute funds to its creditors. The Tether lawsuit represents an important next step in Celsius’ efforts to recover assets and maximize recovery for its stakeholders.
conclusion
The legal standoff that has ensued as Celsius sues Tether is a complex and multifaceted case that underscores the challenges facing the cryptocurrency industry. As the two companies battle it out in court, the broader cryptocurrency community will be watching the case closely to see what impact it could have on the future of the industry.
Ultimately, this dispute highlights the need for greater transparency, accountability, and regulatory oversight in the crypto space. By addressing these issues, the industry can work to build a stronger, more trustworthy ecosystem that can deliver on its promise of financial innovation and inclusion.
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