Celsius, the cryptocurrency lender that went bankrupt in 2022, continues to make headlines despite getting back on track last February. Indeed, Celsius is asking for several billion dollars from Tether, Compound, Badger DAO and Bancor.
Bankrupt firm Celsius demands billions from Tether
Celsius, the cryptocurrency lender that went bankrupt in the summer of 2022, recently made headlines after it filed a lawsuit against users who withdrew their funds from the platform before its collapse.
And, even though Celsius officially emerged from bankruptcy last February, the lender does not appear to be finished with its litigation. Indeed, we have just learned from Paolo Ardoino, the CEO of Tether, that the company best known for issuing USDT, had also been sued by Celsius..
In 2022, Tether made available USDt to some of its customers – including Celsius. Tether's arrangements with customers are very simple: Tether provides USDt to selected customers who provide an overcollateralization in Bitcoin.
If the price of bitcoin (the collateral) falls… https://t.co/UuEs1ig8zr
— Paolo Ardoino 🤖🍐 (@paoloardoino) August 10, 2024
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In its complaint, Celsius claims that during its bankruptcy proceedings, it had used a Tether loan in the form of USDT by depositing a certain amount of Bitcoin as collateral.. However, with the price of BTC dropping shortly after, Tether reportedly asked Celsius to provide more Bitcoin to back its loan, which the lender allegedly did.
But according to Celsius' allegations, as the latter sought to raise funds to provide collateral again, Tether reportedly decides to liquidate $815 million USDT loan to the firmAt that time, Celsius had provided over 39,542 BTC, slightly less than the amount needed to cover its debt.
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Tether within its rights?
According to Paolo Ardoino's publication on X, Tether had every right to liquidate Celsius's position. In fact, the move was the result of a mutual agreement with Alex Mashinsky, the CEO of the bankrupt lender, according to the complaint..
In June 2022, when the price of bitcoin dropped, Celsius asked Tether to sell the bitcoins that Tether held as collateral. Tether was able to liquidate these bitcoins and return the excess to Celsius (and transparently disclosed the action taken at the time) [sur le blog de Tether, NDLR]).
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In its complaint, Celsius claims to want to recover all of the BTC transferred during the period in question, a total of 57,428.64 bitcoins. At the current BTC price, this is worth over $3.47 billion..
However, Tether says it is prepared to go to court to defend itself, with Paolo Ardoino saying: There are many flaws in the plaintiff's case and we are very confident in the strength of our contract and our actions “.
Compound, Badger and Bancor also targeted
Tether, however, is not Celsius' only target. Bancor, a decentralized protocol on Ethereum on which Celsius had opened positions, reportedly claimed to protect its users against impermanent loss.
However, Celsius claims that Bancor's protection mechanism was flawed from the start, as the fees generated by the protocol were insufficient to cover potential losses.
Celsius even claims that Bancor's founders, two of whom are related to Israeli Prime Minister Benjamin Netanyahu, were probably aware of the system's weaknesses. Cryptocurrency lender says protocol flaws cost it about $7.8 million in losses.
🗞️ In related news – USDT issuing company Tether to double staff
In addition to this case, Celsius also sued Badger DAO and Cloudflare for a security breach that led to the loss of $50 million in Bitcoin during the platform's hack in 2021.
Compound Labs, due to a massive liquidation caused by an abnormal increase in the price of the stablecoin DAI on Coinbase Pro (apparently the only source of data for Compound's oracle, according to the complaint), is also targeted by a complaint from Celsius.
Thus, Celsius would have been liquidated on 8 of its open positions on Compound following this pricing error, for an amount brought to 50,268.95 ETH. At the current price of Ether, this is equivalent to just under $135 million.
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Source: Tether
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