Celsius, the bankrupt cryptocurrency exchange, has initiated legal action against Tether, accusing the stablecoin issuer of misappropriating assets

Bankrupt cryptocurrency exchange Celsius has filed a lawsuit against Tether, accusing the stablecoin issuer of misappropriating assets and seeking restitution totaling approximately $3.5 billion.

The lawsuit, filed in the United States District Court for the Southern District of New York on Wednesday, alleges that Tether breached its contract with Celsius by prematurely liquidating Bitcoin (BTC) collateral provided by the exchange without allowing it to post further assets.

The legal complaint details a transaction where Tether loaned USDT, its stablecoin pegged to the US dollar, to Celsius, which in turn pledged 39,542.42 BTC as collateral. The agreement stipulated that if Bitcoin’s value declined, Celsius would be required to provide additional collateral to avoid having the pledged BTC liquidated.

According to the lawsuit, Celsius was prepared to post further collateral, but Tether “unlawfully, willfully, and knowingly breached the parties’ agreement by prematurely and unlawfully closing out Celsius’s position without allowing Celsius to post additional collateral.”

The exchange alleges that the stablecoin issuer’s actions resulted in the total liquidation of Celsius’s position, causing “damages in an amount to be proven at trial, but not less than $100,000,000.”

Celsius is demanding the return of 57,428.64 BTC, which includes the 39,542.42 BTC collateral and additional Bitcoin transfers during the same period, or their equivalent value in U.S. dollars. The exchange is also seeking legal fees.

In a statement provided to Cointelegraph, a Tether spokesperson said that the lawsuit is “completely without merit and appears to be part of a shakedown attempt by Celsius.” The spokesperson added:

“The facts are clear: Celsius borrowed money from Tether, and as the market value of the collateral dropped substantially, Celsius itself directed and authorized the closeout of its position, fully aware of the consequences and the relevant market prices.”

The spokesperson went on to state that Tether acted in accordance with the terms of the agreement and its standard industry practice, and that the company’s financial stability is not at risk.

“Tether has $12 billion in consolidated equity, and even in the unlikely event of an adverse outcome in this case, which we do not anticipate, USDT holders would be fully protected,” the statement reads.

The lawsuit comes amid a string of legal battles following Celsius’ collapse and Chapter 11 bankruptcy filing in July. The exchange is also facing a class-action lawsuit filed by customers alleging that the platform misled them about the safety of their assets.

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