Stablecoin issuer Tether has reached a significant agreement, committing to pay $299.5 million to the Celsius Network bankruptcy estate. This settlement brings an end to years of complex litigation stemming from the crypto lender's dramatic collapse in 2022. While a substantial sum, this payment is considerably less than the nearly $4.5 billion in Bitcoin that Celsius had initially sought. The resolution of all outstanding issues between Tether and the Celsius estate was announced by the Blockchain Recovery Investment Consortium (BRIC), a joint venture between VanEck and GXD Labs, on Tuesday.

The settlement concludes one of the most contentious legal battles in the history of cryptocurrency bankruptcies. Celsius had initiated a lawsuit against Tether in August 2024, alleging that the stablecoin issuer had improperly liquidated approximately 39,500 Bitcoin, which Celsius had used as collateral, prior to its bankruptcy filing in July 2022. Celsius claimed that Tether violated an agreement that mandated a 10-hour notice period before the sale of such assets, thereby depriving the lender of any remaining equity in the position.

Tether, however, vehemently denied any wrongdoing, branding Celsius's suit as a "baseless shakedown." The company maintained that its actions were entirely within the terms of a 2022 agreement. This agreement required Celsius to post additional collateral as Bitcoin prices declined. When Celsius failed to meet this margin call, Tether asserted that it proceeded to liquidate the Bitcoin, under Celsius's explicit direction, to cover an $815 million debt. Despite Tether's denial, a U.S. bankruptcy judge in New York allowed Celsius's case to move forward earlier in the year.

The $299.5 million payment was facilitated through BRIC, which was established in early 2023 as a joint recovery vehicle designed to pursue claims and recover assets from distressed crypto firms. BRIC was officially appointed by the Celsius debtors and creditors’ committee in January 2024 to oversee asset recovery and manage the ongoing litigation. While this payment represents a positive outcome for Celsius creditors, it is considered a modest recovery when weighed against the vast scale of losses incurred during the company’s downfall.

Celsius, once a dominant force among crypto lenders, initiated a freeze on customer withdrawals in mid-2022 amidst a backdrop of plunging token prices and ill-fated investments. Its eventual bankruptcy laid bare billions in customer losses and brought to light allegations of severe mismanagement by its senior executives. Former Celsius CEO Alex Mashinsky was sentenced in May to 12 years in prison for charges of fraud and market manipulation, with prosecutors asserting he had misused customer funds and artificially inflated the value of the platform's native CEL token. In June, Mashinsky agreed to forfeit any claims he held to assets within the bankruptcy estate.

The collapse of Celsius became a seminal event in the crypto industry's 2022 credit crisis, occurring alongside the high-profile failures of other major platforms such as Voyager, BlockFi, and FTX. The extensive fallout from these events has triggered a wave of litigation and intricate recovery efforts that continue to influence and redefine how courts approach crypto lending practices and collateral agreements in the evolving digital asset landscape.