Tether Vows to Fight “Shakedown” Lawsuit from Bankrupt Celsius Amidst Expanding Ventures

Tether, the powerhouse behind the world’s largest stablecoin, USDT, has announced its intention to vigorously defend itself against what it describes as a “shakedown” lawsuit brought by the bankrupt crypto lender Celsius. The legal battle, which has escalated tensions in the crypto world, involves a demand from Celsius for the return of 57,428.64 bitcoin (BTC) or an equivalent $3.3 billion in today’s market value.

The lawsuit, filed on Friday in the U.S. Bankruptcy Court of the Southern District of New York, centers on a loan agreement between the two companies. Celsius alleges that during the 2022 market crash, Tether insulated itself from Celsius’ impending bankruptcy by demanding and receiving significant collateral, which it then liquidated. This, according to Celsius, constituted “preferential and fraudulent transfers” of bitcoin during the critical ninety-day period leading up to its bankruptcy filing.

Tether, however, sees the lawsuit in a very different light. In a statement on its website, the company emphasized that the liquidation of the bitcoin collateral was conducted at Celsius’ direction and with its consent at June 2022 prices, amounting to $2.4 billion at the time—a figure Tether claims was agreed upon by both parties. Tether CEO Paolo Ardoino dismissed the lawsuit as baseless, stating, “This lawsuit incredibly now seeks the return of approximately US$2.4 billion worth of BTC from Tether, despite the BTC being liquidated at Celsius’ direction and with Celsius’ consent at June 2022 prices.”

Ardoino, who has recently taken the helm as Tether’s CEO after serving six years as CTO, took to X (formerly Twitter) to defend Tether’s actions, vowing to fight the lawsuit “till the end.” He added, “It’s important to set an example on behalf of the entire industry that shameless money grabs will not work.” Tether also reassured its token holders, stating that even in the unlikely event the lawsuit progresses, its nearly $12 billion in consolidated equity as of June 30 ensures that USDT holders will remain unaffected.

Celsius, which officially exited bankruptcy after a court-approved reorganization plan in November, argued in its filing that Tether’s actions resulted in significant financial losses. The lender claimed that Tether applied Celsius’ Bitcoin collateral at an average price of $20,656.88 per BTC, considerably lower than the market closing price of $22,487.39 on June 13, 2022. Celsius is also seeking $100 million in damages for what it describes as breaches of contract.

This legal battle comes at a time when Tether is flush with cash, reporting a staggering $5.2 billion in profit for the first half of 2024. The company’s revenue, largely derived from its stablecoin operations, has soared as rising interest rates have increased the yield on the short-term U.S. government bonds that form a significant part of Tether’s reserve. As Tether expands its horizons, Ardoino has been directing surplus profits into new ventures, including investments in AI and data infrastructure through its venture arm, Tether Evo.

Under Ardoino’s leadership, Tether has already acquired a majority stake in neural implant technology startup Blackrock Neurotech and invested in the data center operator Northern Data Group, whose infrastructure supports AI model training. These moves reflect Tether’s ambition to diversify and challenge tech giants like Microsoft, Google, and Amazon.

Despite its financial success and growth ambitions, Tether remains a controversial figure in the crypto world. The company has faced scrutiny over the composition of its reserves, settling with U.S. regulators for $41 million in 2021 for making misleading statements. Tether has also been accused of using fraudulent means to secure banking services and has been linked to money laundering and terrorist financing, allegations the company has consistently denied.

Ben Tang
Digital Assets Desk