Tether disputes that it borrowed $2 billion from Celsius, as revealed in court documents

Tether, the issuer of stablecoins, disproves a court-appointed examiner’s Tuesday allegation that it borrowed from collapsed crypto lender Celsius, calling the findings a “mischaracterization.”

The stablecoin issuer Tether disputes the claim that it borrowed assets from the bankrupt cryptocurrency lender Celsius.

According to a roughly 700-page study submitted by court-appointed examiner Shoba Pillay on Tuesday, Celsius once loaned Tether around $2 billion. But Tether, which also invested in Celsius, denies ever having borrowed money from the bankrupt company.

Paolo Ardoino, Tether’s chief technical officer, stated in a statement supplied to The Block, “The document includes a mistake, likely as a consequence of the amount of labor and pressure that putting together this submission needed, and this led to a mischaracterization.” “In the agreement, Celsius is described to as the counterparty that was required to deposit more margin, but the borrower really performs this action in order to keep within the agreed-upon risk criteria.”

In a stinging assessment on Celsius issued on Tuesday, Pillay said that the cryptocurrency lender exceeded its own safeguards in lending to Tether, among others. In the report, Pillay references an internal letter from Celsius’ risk committee that expresses worry about the possibility of Tether defaulting on its commitments to Celsius.

“Celsius’ loans to Tether were double its credit limit,” Pillay stated, citing a Celsius document explaining the danger of the company’s overleverage in 2021 with respect to loans to the stablecoin issuer. “The Tether exposure ultimately increased to more than $2 billion, a figure so significant that in late September 2021, the Danger Committee assessed this exposure as being an “existential risk” to Celsius because “Celsius’ capital is inadequate to withstand a Tether default.”

In July, Celsius declared bankruptcy, and CEO Alex Mashinsky resigned amid controversy. New York’s attorney general has also filed a case against Mashinsky for misleading investors.

Pillay, via a representative of her legal firm Jenner & Block, refused to comment. The spokesman denied giving the requested document, explaining that the Celsius document describing the company’s risk exposure to a Tether loan default will be included in a compilation of materials supplied during the current bankruptcy action.

According to the examiner’s assessment, Celsius violated its own lending limitations to other businesses, such as bankrupt crypto investment firms Alameda Research and Three Arrows Capital.

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