Legal battles and financial maneuvers continue to shape the landscape. The latest developments involve Celsius, a bankrupt crypto lender, taking aim at several prominent players in the industry through a series of lawsuits. These legal actions are part of Celsius’ efforts to recover funds for its creditors, targeting companies ranging from stablecoin giant Tether to decentralized finance (DeFi) protocols like Badger DAO and Compound.
Celsius vs. Tether: A $2.4 Billion Bitcoin Dispute
The most significant lawsuit filed by Celsius targets Tether, the issuer of the world’s largest stablecoin. At the heart of this legal battle is a staggering 39,542 bitcoin, valued at over $2.4 billion at current market prices. Celsius claims this bitcoin was collateral for loans it had taken from Tether.
The Liquidation Controversy
- Celsius alleges Tether improperly liquidated the collateral during the market downturn
- The lawsuit argues Tether didn’t give Celsius the full contractually mandated time to meet collateral demands
- Tether reportedly sold the bitcoin at an average price of $20,656.88, below the market low at the time
Tether’s Response
Tether has vehemently denied any wrongdoing, describing the lawsuit as “baseless” and “bullying.” The company’s CEO, Paolo Ardoino, expressed confidence in their contract and actions, hinting at potential flaws in Celsius’ filing.
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
Other High-Profile Targets
Celsius isn’t stopping with Tether. The crypto lender has cast a wide net, filing lawsuits against several other prominent entities in the crypto space.
Bancor DAO and the Netanyahu Connection
One intriguing lawsuit targets Bancor DAO, a decentralized exchange protocol. Notably, two of the defendants are Galia and Guy Ben-Artzi, niece and nephew of Israeli Prime Minister Benjamin Netanyahu. The lawsuit alleges:
- Bancor’s impermanent loss protection mechanism was flawed from the start
- The protocol’s fees were insufficient to cover the cost of protection for all liquidity providers
- Celsius lost approximately 6,540 ETH (worth about $17 million at current prices) due to Bancor’s actions
Badger DAO and the $120 Million Hack
Celsius is also pursuing legal action against Badger DAO related to a $120 million exploit in December 2021. The lawsuit claims:
- Badger DAO’s founder, Christopher Spadafora, touted the protocol’s security despite vulnerabilities
- Cloudflare, a service provider, is accused of lacking reasonable safeguards
- Celsius allegedly lost more than $50 million in bitcoin due to the hack
Compound Labs and the Oracle Incident
Another lawsuit targets Compound Labs, the company behind Compound Finance, over a liquidation event caused by an oracle-related issue. Celsius argues:
- A spike in the price of DAI on Coinbase Pro led to massive liquidations
- Compound’s reliance on a single oracle source contradicted their whitepaper claims
- The incident resulted in Celsius losing over 50,000 ETH
The Road Ahead
As these lawsuits unfold, the crypto industry watches with bated breath. The outcomes could have far-reaching implications for how DeFi protocols handle user funds and how centralized entities interact with decentralized systems. While Celsius has already settled some disputes, such as with KeyFi founder Jason Stone, these new legal battles promise to keep the crypto world on its toes for the foreseeable future.
