Celsius Network’s Legal Action
The defunct cryptocurrency platform Celsius Network has filed a lawsuit against Tether, the largest stablecoin provider, seeking to recover over $2.3 billion in Bitcoin. The lawsuit accuses Tether of exploiting Celsius’ financial troubles for its own gain as Celsius approached bankruptcy.
Details of the Lawsuit
In an adversary complaint filed late Friday, Celsius alleges that it is attempting to reverse and reclaim preferential and fraudulent transfers of 39,542.42 Bitcoin that Tether received in the 90 days leading up to Celsius’ bankruptcy filing in July 2022.
Tether’s Response
Tether has dismissed the lawsuit as “baseless” and claims it is an attempt to shift the financial burden of Celsius’ mismanagement onto Tether. The company labels the lawsuit a “contrived, meritless shakedown” and asserts that it will defend itself vigorously, anticipating a favorable outcome.
Background on the Loan and Collateral
Celsius relied on stablecoins to support its operations and borrowed nearly $2 billion from Tether starting in 2020, pledging tens of thousands of Bitcoin as collateral. As the crypto market declined in the summer of 2022, Tether demanded additional collateral. Celsius also took on an extra $300 million in debt, providing more Bitcoin as collateral.
Collateral Dispute
Tether allegedly demanded more collateral as the crisis intensified in June 2022, giving Celsius only 10 hours to comply. Instead of waiting, Tether utilized all posted collateral—39,542.42 Bitcoin—at a time when Bitcoin prices were dropping sharply, leading Celsius to claim it was repaid “for less than reasonably equivalent value” during its insolvency. Celsius is also seeking at least $100 million in damages.
Tether’s Position
Tether counters that the Bitcoin was liquidated at Celsius’ instruction according to June 2022 market prices.
Celsius’ Bankruptcy and Ongoing Issues
Celsius emerged from bankruptcy on January 31, with its Chapter 11 plan effective. The company planned to distribute over $3 billion in cryptocurrency and fiat to creditors and establish a new Bitcoin mining company, Ionic Digital Inc. It continues to address various issues, including a dispute with former corporate customers over distribution, which is heading to arbitration.
Asset Recovery Efforts
The Blockchain Recovery Investment Consortium (BRIC), formed in early 2023 by GXD Labs and VanEck, is overseeing asset recovery for Celsius. Appointed as the complex asset recovery manager and litigation administrator in February, BRIC is represented by Quinn Emanuel Urquhart & Sullivan LLP, with Benjamin I. Finestone, Anil Makhjiani, Mario O. Gazzola, Arman Cuneo, and Matthew Scheck handling the case.
Case Information
The adversary proceeding is titled Celsius Network Limited v. Tether Limited et al., case number 24-04018, in the U.S. Bankruptcy Court for the Southern District of New York. The main bankruptcy case is In re: Celsius Network LLC et al., case number 1:22-bk-10964, in the same court.
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