Celsius Wins Right to Sue Tether Over 2022 Bitcoin Sale

A US bankruptcy court has granted Celsius Network the right to proceed with its lawsuit against Tether, the issuer of the USDT stablecoin. The lawsuit, which dates back to the 2022 crypto market crash, alleges that Tether wrongfully sold up to 39,500 Bitcoin worth over $4 billion, which it held as collateral for Celsius. The firm reportedly sold the BTC after the price crash, but Celsius claimed that the sale violated its agreement with Tether, which required the stablecoin issuer to give 10 hours’ notice before selling any collateral. Celsius has claimed significant losses and will likely seek damages.

Tether had attempted to halt the lawsuit by requesting the court to dismiss it, arguing that the sale followed due process and that the US court lacked jurisdiction over the matter as the transactions were international. However, the trial judge, Martin Glenn, disagreed and dismissed this submission. In his decision, the judge stated that there were many compelling reasons for the court to entertain the case, especially when the people, system, and accounts used in the transaction by Tether are domiciled in the US. The court added that Celsius can move on with the vital parts of its lawsuit, which include fraudulent transfer, preferential transfer, and breach of contract. However, it dismissed other claims by Celsius, citing jurisdiction and insufficient evidence.

The decision to preserve the breach of contract claim means that Celsius could be entitled to damages if the court finds Tether liable. This ruling is a setback for Tether, as the firm tried to get the court to dismiss the case and described it as “shakedown litigation,” noting that Celsius is to blame for its failure. However, the court decision suggests that Celsius might have a case. Still, it is too early to determine what will happen, and even Judge Glenn acknowledged this. He noted that several factors, such as the time of the sale and whether it was over 10 hours, will determine whether the sale was legal.

Meanwhile, Tether is already facing some regulatory challenges in the US. With the Senate passing the GENIUS Act and the proposed regulation expected to become law, many believe the Tether business could be affected. Experts believe that the proposed law will affect how stablecoin issuers operate and could make it difficult for offshore companies like Tether to continue operating in the US. However, the company had already said it might issue a new stablecoin for the US market. Tether CEO Paolo Ardoino said this earlier this year and has promoted the GENIUS Act as welcome legislation. This differs from how the company has approached the European Union’s Market in Crypto Assets (MiCA) regulations.

This litigation is expected to advance toward what industry observers anticipate could become a landmark crypto legal dispute. This case highlights the complexities and potential risks associated with the crypto industry, particularly regarding the handling of assets during financial distress. The outcome of this lawsuit could set a precedent for future disputes involving stablecoins and crypto lenders. The ruling underscores the reach of US courts over offshore entities with substantial US operations, and the decision to allow the case to proceed could have significant implications for the crypto industry as a whole.