A series of high-profile legal battles have rocked the cryptocurrency industry, with the latest involving two major players — Tether, the issuer of the world’s largest stablecoin USDT, and bankrupt crypto lending platform Celsius Network. At the heart of the dispute is a controversial allegation of alleged improper liquidation of Bitcoin (BTC) collateral, with Celsius seeking to recover $3.3 billion in assets.
Celsius Lawsuit Against Tether
In a dramatic turn of events, Celsius Network, the troubled crypto lending company, has announced that it has… Chapter 11 bankruptcy filed in July 2022.Celsius has filed a lawsuit against crypto company Tether in the U.S. Bankruptcy Court for the Southern District of New York. The lawsuit alleges that Tether engaged in “fraudulent transfers and transfers” of 428.64 bitcoins in collateral in the months leading up to Celsius’ bankruptcy filing.
According to the court filing, Celsius alleges that Tether illegally liquidated approximately 57,428.64 BTC, which is worth approximately $3.3 billion at today’s bitcoin prices. Celsius alleges that Tether’s actions were motivated by a desire to insulate itself from impending bankruptcy, as it demanded and obtained “a significant amount of new, increased collateral” to improve its financial position.
The lawsuit further alleges that Tether sold the bitcoin collateral at an average price of $20,656.88 per bitcoin, which Celsius claims is “significantly below the low price of $22,808 per bitcoin on Bitfinex,” a cryptocurrency exchange controlled by Tether’s parent company. Celsius contends that if it had been given the full 10-hour timeframe stipulated in the loan agreement, it could have provided the additional collateral necessary to avoid liquidating its bitcoin holdings “at the low point of the crypto market news.”
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Tether’s Violent Denial and Defense
Tether coin, a stablecoin provider, has strongly rejected the claims made by Celsius in the Celsius BTC lawsuit in court, calling Celsius’ lawsuit “extortion” and “baseless.” Tether USDT says it will vigorously defend itself against what it sees as “unfounded allegations.”
In a statement on its website, Tether claimed that the Bitcoin collateral was liquidated at Celsius’ direction and with Celsius’ consent, in accordance with the terms of a 2022 agreement between the two entities. According to Tether, when the market crash occurred, the agreement required Celsius to provide additional collateral to avoid liquidating its BTC on the Bitcoin network. However, when Celsius chose not to provide the necessary collateral, it directed Tether to liquidate the collateral it held.
Tether CEO Paolo Ardoino echoed this sentiment on social media, asserting that “there are many flaws in the plaintiff’s case” and that Tether is “very confident in the robustness of our contract and our actions.” Tether has maintained that it acted within the bounds of the agreement and that the Celsius lawsuit is an attempt to shift the burden of Celsius’ financial woes onto the stablecoin provider.
The broader implications of the conflict
The outcome of this legal battle, the Bitcoin dispute between Tether and Celsius Betting, could have far-reaching implications for the cryptocurrency industry. If Celsius prevails, it could set a precedent for how cryptocurrencies are treated in bankruptcy proceedings, potentially leading to stricter regulations and oversight.
However, Tether appears confident in its legal position, noting that its combined equity was worth nearly $12 billion as of June 2022. The company stressed that even in the unlikely scenario where the lawsuit is successful, Tether app users and token holders will not be affected, as the financial stability of the stablecoin provider will remain unaffected.
Brock Pierce’s involvement in legal disputes
Further complicating the situation is the involvement of Brock Pierce, a co-founder of Tether and a prominent figure in the cryptocurrency industry. Pierce, whose net worth was estimated at $1 billion, faced a series of legal challenges in Puerto Rico, where he had ambitious plans to turn the island into a crypto-friendly haven, including Tether’s sports betting initiatives.
Pierce’s efforts to renovate the W Hotel on Vieques, a project he envisioned as a centerpiece of his crypto-focused initiatives, have been mired in legal disputes with former business partners. The disputes have not only cast a shadow over Pierce’s reputation but have also raised questions about the viability of his broader plans for Puerto Rico.
conclusion
The legal battle between Tether and Celsius is a complex and high-stakes dispute that highlights the challenges and risks inherent in the rapidly evolving cryptocurrency industry. As the case unfolds, it is likely to provide valuable insights into the intersection of traditional legal principles and the unique characteristics of digital currencies.
For industry players, this saga serves as a stark reminder of the importance of strong risk management, clear contractual agreements, and transparency. Navigating the crypto landscape requires a delicate balance of innovation, accountability, and collaboration with regulators to build a more resilient and reliable ecosystem.
Disclaimer: The information contained in this article is for informational purposes only and does not constitute financial advice. Investing in cryptocurrencies involves risks, and readers should conduct their own research and consult with their financial advisors before making investment decisions. Hash Herald is not responsible for any profits or losses in this process.
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