On August 9th, 2024, Celsius Network Limited, through the Blockchain Recovery Investment Consortium, LLC, filed a lawsuit against Tether Limited and certain affiliated entities in the United States Bankruptcy Court for the Southern District of New York. 

The lawsuit pertains to actions taken by Tether in 2022 regarding a collateralized loan agreement between the two companies.

Tether has stated that the 2022 agreement permitted Celsius to borrow USDt, Tether's stablecoin, using Bitcoin (BTC) as collateral. 

As the price of Bitcoin declined in June 2022, the terms of the agreement required Celsius to provide additional collateral. 

When Celsius did not provide the additional collateral, Tether claims it was instructed by Celsius to liquidate the Bitcoin held as collateral to settle Celsius' position, which amounted to approximately $815 million USDt at that time.

Tether asserts that it acted in accordance with Celsius' instructions and returned any excess funds to Celsius following the liquidation. 

The lawsuit, which seeks the return of approximately $2.4 billion worth of Bitcoin, challenges the terms of the original agreement and alleges that Tether's actions were improper.

The lawsuit has sparked significant support for Tether from the Bitcoin and cryptocurrency community. Many have rallied behind Tether’s decision to contest the legal action.

Arnab Naskar expressed his approval on X, stating, "glad that tether is taking this stand. This clawback mechanism from third party is not stupid. Seems that some guys are just trying to cover their fees and make some money using some legal loopholes. All the best !"

Another community member, @bitcointazz, echoed this sentiment, saying, "finally someone with enough resources to fight back.. but im sorry you gotta go through with this.. this is one of the clowniest bankruptcy proceedings in crypto."

Other users, including @blknoiz06, @0xMatt, and @danj4k, offered their support, with comments like "W Paolo" and "the hero we need," referring to Tether CTO Paolo Ardoino, who has been vocal about the company's position.

Additionally, CEO of JAN3 Samson Mow expressed confidence in Tether's ability to prevail, stating, "Paolo and Tether will absolutely crush this frivolous lawsuit from Celsius. It’s not a surprising move coming from Celsius, a company that blew up and then sued its own customers to claw back funds. Send these foul beasts into the abyss @paoloardoino."

Tether has expressed confidence in its legal position and stated that it intends to defend itself against the claims. 

The company also highlighted its financial stability, citing nearly $12 billion in consolidated equity as of June 30th, 2024, and assured that the litigation would not impact USDt token holders.

Tether's official response indicates its intention to contest the lawsuit in court.

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