As a seasoned researcher with extensive experience in the crypto space, I find the allegations levied by Celsius against Tether to be both intriguing and concerning. The magnitude of the sums involved and the implications for the broader crypto ecosystem are significant.
Celsius Network Limited has initiated legal action against Tether and its related companies. The lawsuit claims that Tether’s issuance of USDT (Tether’s stablecoin) carried out “fraudulent” and “preferential” transfers of Bitcoin (BTC), totaling more than $2 billion. This lawsuit, filed in a federal bankruptcy court, aims to recover the lost Bitcoin from Tether due to their actions that contributed to Celsius’s bankruptcy during a crucial period prior to this event.
Celsius’ Allegations Against Tether
As a crypto investor, I was intrigued by the news that Celsius Network, a well-known player in our field, struck a loan deal with Tether Limited back in 2020. This agreement enabled them to obtain stablecoins, namely USDT (Tether) and EURT (Euro Tether), at favorable interest rates. In exchange for this financial advantage, Celsius pledged significant collateral, including Bitcoin, as a guarantee for these loans.
During its highest point, the company had obtained approximately $2 billion in USDT from Tether, which was secured by tens of thousands of Bitcoins. The ongoing lawsuit centers around Tether’s actions during the three-month period prior to Celsius filing for bankruptcy on July 13, 2022.
As stated in the complaint, the company behind USDT requested and received a large amount of new collateral from the cryptocurrency lender, amounting to approximately 15,658.21 Bitcoin. This additional collateral also secured new loans totaling an extra 2,228.01 BTC. These actions, referred to as “Preferential Top-Up Transfers” and “Preferential Cross-Collateralization Transfers,” are alleged to have given Tether an unfair advantage over other creditors by improving its financial position.
Preferential Application Transfer & Breach of Contract
13th June, 2022 saw Tether making a final request for more collateral from their counterparty. As per their agreement, this crypto lender had ten hours to respond. Yet, instead of waiting for that period, the stablecoin issuer straightaway seized all the provided collateral by Celsius – amounting to 39,542.42 BTC – instantly, disregarding the time specified in the contract.
In simpler terms, an operation known as “Preferential Application Transfer” is said to have helped Tether conceal its financial obligations. Unfortunately, this troubled cryptocurrency lender later had most of its Bitcoins taken away at a relatively low market price, effectively draining it of its remaining BTC.
Additionally, the lawsuit claims that Tether violated the contract’s 10-hour holding period by immediately selling off the bankrupt estate’s Bitcoin, which was later used to pay off Celsius’ debt in a forced sale. This action, referred to as a “fire sale,” significantly undervalued the Bitcoin, with a total value of $816.82 million according to Tether, whereas its current worth exceeds $2 billion.
As a seasoned investor with over two decades of experience in the financial markets, I can’t help but feel a sense of unease when I see reports like this one about substantial financial damage to crypto lenders. My own career has been marked by market fluctuations and unexpected turns, but the speed and unpredictability of the cryptocurrency market is something else entirely.
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2024-08-10 15:48