Celsius Granted Permission to Sue Tether Over 39,500 Bitcoin Liquidation

Celsius Network has been granted permission by a U.S. bankruptcy judge to proceed with its lawsuit against Tether, alleging that Tether improperly liquidated over 39,500 Bitcoin during Celsius' collapse in 2022. The lawsuit centers around a "fire sale" of Bitcoin, which Celsius claims was conducted without adhering to a mandatory 10-hour waiting period, resulting in a significant loss in value.

The Bitcoin was sold at an average price of $20,656, which was below the prevailing market levels at the time. Celsius argues that this rushed sale cost the company over $4 billion in lost value at current prices. Tether, however, disputes these claims, stating that the Bitcoin was liquidated at Celsius' direction and with its consent at June 2022 prices.

The lawsuit also accuses Tether of violating good faith provisions under British Virgin Islands law and making fraudulent and preferential transfers that can be challenged under U.S. bankruptcy rules. Tether had attempted to dismiss the lawsuit on jurisdictional grounds, arguing that the firm falls outside U.S. bankruptcy law. However, the judge ruled that the conduct and transfers in question were domestic enough to keep the case in U.S. court.

While some secondary claims were dismissed, the core breach-of-contract and fraudulent transfer counts will proceed. The case is part of the broader fallout from Celsius' collapse in mid-2022, when the lender froze customer accounts and entered bankruptcy with a multibillion-dollar hole on its balance sheet. Celsius exited Chapter 11 proceedings in January after an 18-month restructuring and has begun repaying creditors.

Earlier this year, Celsius also appealed a court decision rejecting its $444 million claim against the insolvent crypto exchange FTX. Celsius originally pursued a $2 billion claim against FTX, arguing that misleading statements made by FTX executives damaged Celsius’ financial stability and contributed to its eventual collapse. As the case evolved, Celsius revised its claim, narrowing the focus to $444 million. The reduced claim centered on preferential transfers that Celsius alleged unfairly benefited select creditors at the expense of others.