CEO Paolo Ardoino Responds to Celsius Lawsuit Against Tether, Calls It ‘Baseless Shakedown’

Two years after filing for bankruptcy, Celsius is trying to recover some funds by suing Tether for an alleged wrongful settlement of more than $800 million of BTC (at mid-2022 prices).

The stablecoin issuer was quick to respond, calling the lawsuit “groundless hype” and vowing to fight to win.

Celsius goes behind Tether

The lawsuit, filed Aug. 9 in the U.S. Bankruptcy Court for the Southern District of New York, alleges, among other things, that Tether breached its contract against Celsius two years ago. The two entities had signed a loan agreement in 2020, which allowed the previous cryptocurrency lender to lend USDT and EURT at low interest rates by posting collateral in the form of bitcoin (BTC).

During the peak of the bear market in mid-2022, the price of BTC fell sharply and the Celsius collateral was up for liquidation, so Tether asked for more. According to the lawsuit filing, the lender transferred more than 16,700 additional BTC in moves described as “Preferred Top-Up Transfers” and “Preferred Cross-Collateralization Transfers,” which “unfairly” enhanced Tether’s position as creditor compared to others.

The stablecoin issuer requested additional collateral on June 13, 2022, and Celsius was “entitled to ten hours to deposit” the funds, according to the token agreement between the two. However, the filing alleges that Tether did not wait for the ten-hour deadline. Instead, the company “went ahead with an improper application of 39,542.42 Bitcoin, the entire collateral that Celsius had posted, using the pledged Bitcoin to cover its exposure in full, but destroying the residual interest of Celsius in the guarantee”.

“This final preferred transfer (as defined below, the “Preferred Application Transfer”), valued at more than $2 billion in current dollars, also enhanced Tether’s position because a substantial portion of the collateral putative was avoidable and consisted of top-up Transfers, which were combined with the entire published Bitcoin.

Tether responds

Just a day after the lawsuit was filed, Tether and its CEO, Paolo Ardoino, issued statements in response. The chief executive explained that Tether “offers USDT to select customers who provide overcollateralization in Bitcoin.” If the price of the collateral falls below the price of the margin call, the borrower must post more collateral. If they don’t, Tether “has the right to liquidate the customer’s position.”

Contrary to Celsius’ claims above, Ardoino said the lender “instructed Tether to sell the Bitcoin that Tether held as collateral” once the price of BTC dropped in mid-2022. The issuer of stablecoin explained at the time that it liquidated the BTC and managed to “return the excess to Celsius”.

“Now, more than two years later, this baseless lawsuit attempts to claim that we should return the bitcoin that was sold to cover the Celsius position. There are many flaws in the plaintiff’s presentation, and we are very confident in the soundness of our contract and our actions”. – continued Ardoino.

Tether’s statement further described the lawsuit as a “dismissal without merit” that “will not benefit anyone other than the lawyers, bankers and consultants involved in bringing this case.”

In any case, Ardoino assured Tether token holders that they won’t be affected even if “in the remotest scenario” this “baseless demand gets somewhere” because the company has nearly $12 billion in assets of dollars

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