Celsius Sues Tether for $4 Billion Over 2022 Bitcoin Liquidation

Celsius, a prominent cryptocurrency lending platform, has initiated a $4 billion lawsuit against Tether, the issuer of the USDT stablecoin. The lawsuit centers around Tether's premature liquidation of 39,500 Bitcoin during Celsius' collapse in 2022. Celsius alleges that Tether violated lending agreements, acted in bad faith, and made fraudulent transfers by selling the Bitcoin below fair market value.

Celsius claims that Tether held the Bitcoin as loan collateral and chose to sell it off in June 2022, as Bitcoin’s price plunged. Celsius argues that Tether didn’t follow the agreed-upon procedures, which included a 10-hour waiting period, and liquidated the assets too quickly in a so-called “fire sale.” At the time of the sale, Bitcoin was trading at around $20,656, which Celsius claims was below fair market value.

Celsius’s legal complaint also accuses Tether of violating principles of good faith and fair dealing under British Virgin Islands law. It also seeks compensation because Tether “made fraudulent and preferential transfers” that can be reversed under the U.S. Bankruptcy Code. Celsius believes Tether acted dishonestly and took advantage of its position while Celsius was in distress. The complaint also claims that Tether funneled the proceeds from the sale into its own Bitfinex accounts.

Tether responded by asking the court to throw out the case, arguing that the U.S. court doesn’t have jurisdiction because Tether is based in Hong Kong and the British Virgin Islands. Tether also claimed that the allegations amount to an “impermissible extraterritorial application” of U.S. law and that Celsius failed to state valid legal claims.

However, Judge Martin Glenn eventually ruled that some of Celsius’s claims, including breach of contract, fraudulent transfer, and preference claims, can proceed. The judge agreed that, even though Tether is based overseas, the company’s actions involved U.S.-based personnel, financial accounts, and communications. This, according to Judge Glenn, was enough to establish jurisdiction.

Celsius was once one of crypto’s largest lending platforms. However, its collapse in 2022 left customers and investors reeling. The fallout included a Chapter 11 bankruptcy process that lasted 18 months, as 93% of creditors received compensation during the restructuring. During this time, former Celsius CEO Alex Mashinsky pleaded guilty to fraud and is now serving 12 years in prison. The company officially exited bankruptcy in January of last year. Yet despite having repaid most creditors, Celsius continues to hash things out with Tether.

Tether’s CEO Paolo Ardoino has publicly dismissed the lawsuit as a “shakedown,” and even argues that Celsius is merely seeking a windfall despite already resolving most of its obligations. Others within the crypto community speculate that Tether liquidating Celsius’s Bitcoin could have simply been a mistake, not fraud.

Overall, regardless of whether Celsius wins or loses, this lawsuit has already become a major talking point when it comes to crypto regulation and ethics. A $4 billion claim, even after creditors have been repaid, shows that the events of 2022 are far from over.