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Celsius Sues Tether to Recover $2B in Bitcoin Lost in Alleged Fraudulent Transfers

DailycoinDailycoin2024/08/10 23:03
By:Dailycoin
  • Celsius has sued USDT issuer Tether.
  • The bankrupt crypto lender seeks to recover billions in Bitcoin from Tether.
  • Celsius said the Bitcoin was lost in “fraudulent” transfers.

Celsius Network Ltd. seeks to recover billions in Bitcoin from USDT issuer Tether and its affiliated entities, the bankrupt crypto lender said in a new court filing.

The lawsuit alleged that Tether breached its token agreement with Celsius when it applied the company’s property (Bitcoin) held as collateral to pay itself for Celsius’s outstanding loan. Celsius claimed this happened during the ninety days before it filed for bankruptcy on July 13, 2022.

The Token Agreement

According to the complaint , Celsius and Tether signed the token agreement in February 2020 to allow the crypto lender to borrow USDT from the company by posting collateral in Ether, Tether Gold, or Bitcoin.

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The parties amended the agreement in January 2022 and introduced a requirement that mandated Tether to send a notice of a collateral demand to Celsius if the company’s collateral fell below a specified threshold. The agreement provided Celsius ten hours to satisfy the collateral demand.

Celsius said it borrowed 512,330,000 USDT from Tether under the amended token agreement and posted 16,505.17 BTC as collateral to secure the loan.

Per the filing, as Bitcoin’s price began to fall in April 2022, Tether initiated several demands under the amended token agreement to improve its security on the antecedent debt owed to it by Celsius. The crypto lender responded by depositing 16,737.27 Bitcoin as additional collateral, which it alleged wasn’t held in segregated wallets or accounts.

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While Celsius later borrowed more USDT from Tether and posted respective collaterals in Bitcoin, things went south on June 12, 2022, when Tether issued new demands for additional collateral.

Celsius Seeks $2B Clawback

Celsius claimed that Tether sent the first demand late at night (Eastern time) on June 12, 2022, which was fulfilled by a transfer of 3,041.73 Bitcoin to the stablecoin issuer the following day. Several hours later, Tether reportedly made a second collateral demand to Celsius and “demanded immediate payment.”

This was contrary to the token agreement the two companies had signed.

“With more than half of Celsius’s ten-hour period to post additional collateral remaining, Tether purported to begin a fire sale of Celsius’s collateral. Tether performed this “fire sale” by purportedly selling Celsius’s Bitcoin in a series of tranches over a period of several hours.” The filing read.

Tether allegedly applied the entirety of Celsius’s collateral, 39,542.42 Bitcoin, at a dollar value of $816,822,948.

“As such, this application of collateral was a fraudulent transfer and should be avoided under the Bankruptcy Code and applicable state law. Celsius claimed. These preferential and fraudulent transfers of Bitcoin should be avoided and recovered from Tether, and Tether should be ordered to pay damages for its unlawful application of collateral.”

The contested Bitcoin is worth over $2 billion at current market prices.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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