Tether's collection of an $ 840 million loan, which was put to the test of Celsius in the bankruptcy of Celsius

The stable coin emittent Tether is due to a loan reclaimed by Celsius Network in the amount of 840 million

Celsius applied for insolvency protection in the United States this month, the youngest victim of the recent crypt of crypto prices and gave hundreds of thousands of its customers accept losses in their investments.

Tether, whose stable coin is worth a key role in the cryptoma markets, which is known as USDT, has paid back a loan of $ 840 million to Celsius by selling the Bitcoin Celsius, which was pledged as security.

The question is whether Celsius could reclaim the value that Tether received in the credit liquidation. The answer would clarify an unsafe area of ​​insolvency law and, in the worst case, meet the reserves for Tether that underpin.

"Can Celsius recover.. This was announced by Celsiuss law firm Kirkland & Ellis in a presentation in front of the New York insolvency court last week. The question was one of the "legal questions that are decisive for the outcome of the case".

Tether, Celsius and Kirkland did not respond to inquiries about comments.

The solution to the questions about Tether's loans and other crypto -assured loans will include complicated questions about how rules apply to secure loans in the market for digital assets. When lending, the borrower pledged assets as security to the lender.

"We are in an area in which the law is quite uncertain and rather contradicts the general market expectations," said Brandon Hammer, lawyer for bankruptcy law at Cleary Gottlieb.

Many in the crypto markets have incorrectly assumed that the simple in-possessing of cryptos pledged as security would protect their position as a secure lender under bankruptcy law, said Hammer.

In fact, they could still be forced to return the assets so that they only have an unsecured claim in the amount of the loan value.

Tether had a outstanding loan of $ 840 million in USDT tablecoin token to Celsius in May. This month it was said that Celsius had 130 percent of the value of the loan in Bitcoin as security.

in May and June, when Bitcoin prices fell, Celsius was unable to store further collateral in order to maintain the loan in response to a claim to a height of Tether, said Celsius boss Alex Mashinsky in a court act.

The promised Bitcoin from Celsius then sold

tether to repay the loan and returned the remaining collateral. The mutual liquidation led to a loss of $ 100 million for Celsius, said Mashinsky.

Tether, whose USDT token has regained its price of $ 1 after two months after two months of trading with a slight but persistent discount, said that this month there was no loss in his loan to Celsius.

The StableCoin emittent added that his “risk culture show an understanding of both the lending business and the consideration of the regulatory landscape in order to achieve and maintain its business goals”.

The liquidation is probably checked by Celsius and the committee, which is formed in the bankruptcy proceedings in order to represent unsecured creditors, said insolvency lawyers.

"One of the things that are examined is whether Tether was completely secured or not. Has Tether properly perfected his security in his collateral?" Said Tad Davidson, co-manager of insolvency practice with Hunton Andrews Kurth.

lender who have not properly proven their claim to certain assets - a process that is referred to as "perfection" - can be in the mass of unsecured creditors in bankruptcy at the end of the stack and may suffer enormous losses. In the event of a dispute over the use of security, a comparison can be agreed or in the worst case the debtor sue the creditor.

"The way you perfect the security of Bitcoin was not tested in any legal dispute," said Jonathan Cho, lawyer for insolvency law at all & overy.

The uncertainty was increased when El Salvador Bitcoin declared a legal means of payment last year. The Uniform Commercial Code, rules followed by almost all US states, characterized by foreign governments recognized as a remedy for physical money, the safety of which can only be perfected by physical possessions-a problem for digital currencies.

"It is crazy that the actions of El Salvador dictate the results of US law, but that's how it is," said Adam Levitin, Professor of Law in Georgetown and director at Gordian Crypto Advisors.

The UCC was updated this month to include specific rules on crypto safety that concentrate on the control of the asset. But the rules are not yet a law and do not apply retrospectively. The current best practice on the cryptoma markets includes the exhibition of public documents, which are known as UCC submissions and declare a security interest in intangible assets, or the application of rules for fixed assets in which a third-party postponement takes control of the asset, said lawyers.

It is unclear whether Tether chose one of the two approaches. There is no UCC registration for the safety interest of Tether in New Jersey, where Celsius is based. There may be UCC applications for Tether's interest elsewhere. Tether's public explanation of the credit liquidation process contained no indication of a third party.

In the bankruptcy proceedings, even the smallest mistakes in the security perfection of aggressive creditors can be used to improve their position. Celsius claims to have $ 5.5 billion in liabilities, but only $ 4.3 billion in assets.

Robert Gayda, a partner at Seward & Kissel, said: "If you have someone who will not recover completely, you will have a motivated believer who wants to see this Tether transaction."