Bankrupt Crypto Lender Sues Tether for Over $2 billion

Celsius Network Ltd. has filed a lawsuit against Tether and its affiliates, accusing them of engaging in "fraudulent" and "preferential" transfers involving over $2 billion in Bitcoin (BTC).

The lawsuit, filed in federal bankruptcy court, seeks to recover the lost Bitcoin, which Celsius claims was mishandled by Tether during a critical period leading up to its bankruptcy.

In 2020, Celsius, a major crypto lender, entered into a loan agreement with Tether Ltd., allowing it to borrow stablecoins like USDT and EURT at low-interest rates, using Bitcoin as collateral. By mid-2022, Celsius had borrowed nearly $2 billion in USDT, backed by tens of thousands of BTC.

The lawsuit alleges that during the ninety days before Celsius filed for bankruptcy in July 2022, Tether demanded and received substantial additional collateral, totaling 15,658.21 BTC, and secured new loans with an additional 2,228.01 BTC. These actions, described as “Preferential Top-Up Transfers” and “Preferential Cross-Collateralization Transfers,” allegedly unfairly benefited Tether at the expense of Celsius’s other creditors.

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On June 13, 2022, Tether reportedly demanded more collateral, giving Celsius just 10 hours to respond. However, Tether allegedly applied all of Celsius’s collateral—39,542.42 BTC—immediately, breaching the contract. This “Preferential Application Transfer” is claimed to have caused substantial financial damage, as Tether sold the Bitcoin at a lower market value, significantly below its current worth.

The lawsuit argues that Tether’s liquidation of Celsius’s Bitcoin was commercially unreasonable, violating established market practices. Celsius seeks to recover the Bitcoin or its equivalent value in damages, claiming that Tether’s actions deprived it of the opportunity to withstand the market downturn and pursue bankruptcy protection.

Alexander Stefanov

With over 8 years of experience in the cryptocurrency and blockchain industry, Alexander is a seasoned content creator and market analyst dedicated to making digital assets more accessible and understandable. He specializes in breaking down complex crypto trends, analyzing market movements, and producing insightful content aimed at educating both newcomers and seasoned investors. Alexander has built a reputation for delivering timely and accurate analysis, while keeping a close eye on regulatory developments, emerging technologies, and macroeconomic trends that shape the future of digital finance. His work is rooted in a passion for innovation and a firm belief that widespread education is key to accelerating global crypto adoption.