Tether denies it borrowed $2B from Celsius, as described in court report

Stablecoin issuer Tether is pushing back against assertions that it borrowed funds from failed crypto lender Celsius. 

According to a nearly 700-page report filed Tuesday from court-appointed examiner Shoba Pillay, Celsius at one point had lent approximately $2 billion to Tether. But Tether, which also invested in Celsius, denies it ever borrowed funds from the failed firm. 

“The document contains a mistake/typo, probably due to the amount of workload and pressure that putting together this filing required and this resulted in a mischaracterization,” Paolo Ardoino, Tether's chief technology officer, said in a statement provided to The Block. "In fact, in the document Celsius is referred as the counterparty that had to post additional margin, an activity that is performed in fact by the borrower, in order to remain within the agreed risk parameters."

In a damning report about Celsius released Tuesday, Pillay said the crypto lender blew past its own safeguards to overleverage itself in lending to Tether, among others. In the report Pillay cites an internal document from Celsius' risk committee that raises concerns about the potential for Tether defaulting on obligations to Celsius. 

"Celsius’ loans to Tether were twice its credit limit," Pillay wrote, citing a Celsius document outlining the risk of the company's overleveraging in loans to the stablecoin issuer in 2021. "The Tether exposure eventually grew to over $2 billion—a number so large that in late September 2021 that exposure was described to the Risk Committee as 'present[ing] an ‘existential risk’ to Celsius' because 'Celsius’ capital is insufficient to survive a Tether default.'"

Celsius filed for bankruptcy in July and its CEO Alex Mashinsky resigned amid a scandal. Mashinsky is also facing a lawsuit from New York’s attorney general for defrauding investors.  

Through a spokesperson for her law firm, Jenner & Block, Pillay declined to comment. The spokesperson declined to provide the document in question, saying that the Celsius document detailing the company's risk exposure to a Tether loan default would be included in a compilation of documents provided in the ongoing bankruptcy proceeding.  

The examiner report says Celsius also exceeded its internal limits on lending to other companies, including failed crypto investment firms Alameda Research and Three Arrows Capital.