Tether has agreed to a significant payout of $299.5 million to the Celsius Network’s bankruptcy estate to settle claims tied to the crypto lender’s collapse in 2022. This resolution might prompt discussions regarding accountability for stablecoin issuers and their potential legal risks in cryptocurrency bankruptcies.
The Blockchain Recovery Investment Consortium (BRIC)—a partnership between asset manager VanEck and GXD Labs, which is associated with Atlas Grove Partners—announced the settlement on Tuesday. This deal concludes a years-long dispute over Bitcoin (BTC) collateral transfers and liquidations preceding Celsius’s well-publicized bankruptcy in July 2022.
Formed in early 2023 to maximize creditor recoveries from bankrupt digital-asset companies, BRIC was appointed as the asset recovery manager and litigation administrator by the Celsius Debtors and the Unsecured Creditors’ Committee in January 2024, following the company’s exit from bankruptcy.
Celsius Network had previously launched a lawsuit against Tether, claiming that the issuer improperly liquidated the Bitcoin backing loans stated in USDt (Tether’s stablecoin). The complaint suggested that Tether sold the collateral when Bitcoin’s price was near Celsius’s debts, effectively eliminating Celsius’s position and pushing it toward insolvency.
The current settlement, while substantial, is merely a fragment of the approximate $4 billion in claims Celsius sought in court after an adversary proceeding initiated in August 2024. In the following month, the bankruptcy court allowed the larger lawsuit against Tether to proceed, leaving uncertainties about how this latest settlement might influence ongoing legal matters.
This outcome could indicate increasing legal dangers for stablecoin issuers as counterparties within distressed crypto markets, potentially prompting a reevaluation of their responsibilities by regulators and courts in future insolvencies.
Historically, issuers like Tether have asserted that their involvement is solely transactional, focused on issuing and redeeming tokens without assuming liability for their use across exchanges, lenders, or decentralized finance platforms.
Emerging from One of Crypto’s Darkest Chapters
Celsius’s bankruptcy is part of a series of crypto failures in 2022, contributing to a severe bear market and laying the groundwork for FTX’s collapse that same year.
The repercussions were particularly severe for former Celsius CEO Alex Mashinsky, who agreed in June not to claim any assets from the company’s bankruptcy estate. He was subsequently sentenced to 12 years in prison for two felony charges, with reports indicating he reported to prison in September.
Celsius was not alone in its struggles; leading crypto lenders like BlockFi and Voyager Digital also filed for bankruptcy protection during 2022, followed by Genesis Global Capital in the next year. An analysis from the Federal Reserve Bank of Chicago reveals that customers withdrew nearly $13 billion from crypto-asset platforms between May and November 2022 as trust in the sector eroded.
The Chicago Fed noted, “High-yield products were a key magnet for customers at some platforms,” citing interest rates often exceeding 17% that drew investors in amid the bull market, but proved unsustainable when prices fell.
