Back in July 2022, the crypto lender Celsius filed for Chapter 11 protection. The company suffered from the crypto market panic that followed the collapse of LUNA. At that time, everyone was trying to guess which token was going down next, and the wave of panic led to several high-profile bankruptcies in the crypto space.
Celsius spent many months under Chapter 11 as creditors were trying to develop an acceptable plan. In the early 2024, things have started to move. The plan was approved, and creditors have started to receive their money back.
Starting as a “crypto bank prototype”, Celsius ended up transforming into a Bitcoin miner named Ionic Digital. The operations of the new company are managed by Hut 8, which is a public company whose shares trade on NASDAQ under the ticker HUT.
As it turns out, the story of Celsius's bankruptcy is not over yet. Celsius wants to get more than 57,000 BTC from Tether, the issuer of USDT, which is valued at roughly $3.4 billion at current market prices. Put simply, here’s the new FUD on Tether.
Let’s take a look at the . Back in 2022, Tether USDT to Celsius in the amounts that the latter requested. According to the agreement between Tether and Celsius, Bitcoin was posted as collateral. The price of BTC has started to fall amid a broad crypto market panic in June 2022. Therefore, Tether asked Celsius to post additional collateral. In simple terms, Celsius received a margin call from Tether. Celsius did not do so, and Tether liquidated the BTC collateral to close out the USDT position of Celsius.
Taking a look at the big picture, this is how strong sell-offs develop. Asset prices start to fall. Some assets are used as collateral, so margin calls start flying. In most cases, additional collateral is not provided, so the market is hit with forced sales, which push prices even lower and trigger more margin calls. This is what happened back in June 2022.
Now, Celsius is trying to get the Bitcoin, which was used as collateral, back from Tether. Celsius argues that Tether had an advantage over other creditors and was able to get its money back before bankruptcy.
To fight FUD, Tether noted that its consolidated was $11.9 billion on June 30, 2024. Thus, the case does not present a serious threat to the company’s financial position even if it is lost.
It should be noted that the risks of losing such a case are minimal. At this point, it looks like Celsius’ lawyers found a way to keep their checks going by involving the company in a dubious endeavor. The rules of collateral use are so well-established that it would be a major surprise if the court found anything that would be able to reverse the deal between Celsius and Tether. It is not surprising to see that the market does not see any real danger for Tether as USDT’s peg to USD remains stable.
