According to The Block, bankrupt cryptocurrency lending company Celsius filed a lawsuit against stablecoin issuer Tether last Friday (9th), attempting to recover 39542 bitcoins (BTC) worth approximately $2.4 billion that were liquidated. Tether strongly denies any misconduct in the liquidation process and has stated that it will defend itself against Celsius's unfounded accusations.

According to Tether's statement, this lawsuit stems from an agreement reached between the two parties in 2022. According to the agreement, Tether provided US dollar stablecoin USDT to Celsius as requested at the time, and Celsius submitted Bitcoin as collateral to Tether. Tether continues to argue that due to the decline in Bitcoin prices starting in June 2022, the agreement between the two parties requires Celsius to provide additional collateral to prevent its BTC from being liquidated. When Celsius chooses not to submit additional Bitcoin, it instructs Tether to liquidate the Bitcoin collateral in order to clear Celsius's approximately $815 million USDT position on Tether.

Tether continued, "This lawsuit not only fails to acknowledge the clear validity of the agreement signed before Celsius's bankruptcy a few years ago, but also attempts to unfairly impose the costs of Celsius's mismanagement and failure on Tether. It has been over two years since it signed a fair agreement with Tether - and it was later initiated by Zhuge - but this lawsuit now unbelievably demands Tether to return approximately $2.4 billion worth of BTC, even though these BTC were liquidated at the June 2022 price under Celsius's instructions and with Celsius's consent

Celsius's statement

According to the lawsuit, Celsius claims that when the cryptocurrency market began to plummet in mid-2022 (within 90 days before Celsius filed for bankruptcy in July of that year), Tether protected itself from the impending bankruptcy by "priority and fraudulent transfer" of Bitcoin. Specifically, Tether has repeatedly requested and obtained a large amount of new and increased collateral to improve its position in the upcoming bankruptcy

Celsius claimed that after meeting Tether's additional collateral requirement of over 3000 BTC (valued at approximately $350 million at the time) on June 12, 2022, Tether proposed a second collateral requirement. When Celsius raised funds within the ten hour waiting period stipulated in the contract, Tether decided to liquidate all of Celsius's collateral, which is 39542 BTC, in just a few hours.

Celsius argues that if the company had been able to raise Bitcoin at the full time specified in the contract, they could have raised enough Bitcoin to meet Tether's requirements:

If Celsius has the opportunity to meet the collateral demand (which is their right in the contract), it can avoid disposing of its Bitcoin when the cryptocurrency market is approaching a bottom. Instead, the disposal is only for the benefit of one creditor: Tether

However, the lawsuit also acknowledges that during the chaos on June 13, 2022, Celsius CEO Alex Mashinsky allegedly allowed Tether to liquidate Celsius's collateral in an orderly manner.

The lawsuit also points out that Tether's average transaction price during the liquidation of Celsius's Bitcoin was significantly lower than the market closing price of the day, resulting in losses.

Tether strongly denies any misconduct in its statement and wrote, "We look forward to responding to this fictitious and unfounded extortion in court, and no one will benefit from it except for the lawyers, bankers, and consultants involved in bringing this case forward." Tether CEO Paolo Ardoino also wrote on X, "The claimant's documents have many loopholes, and we have great confidence in the reliability of our contracts and actions

In addition to Tether, decentralized finance (DeFi) related organizations such as Badger DAO, Compound, and Bancor have also recently become targets of lawsuits by Celsius.

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