Celsius Wins Court Approval to Sue Tether Over 2022 Bitcoin Liquidation

A US bankruptcy judge has ruled that Celsius Network's lawsuit against Tether can proceed, despite attempts by Tether to dismiss the case. The court denied key parts of Tether's motion to dismiss claims related to the liquidation of 39,500 Bitcoin during Celsius's collapse in June 2022. Celsius alleges that Tether executed a "fire sale" of the Bitcoin collateral at an average price of $20,656 per coin, violating their lending agreement and constituting fraudulent transfers under US law. Court documents reveal that Tether applied the proceeds against Celsius's $812 million debt without following agreed procedures.

The judge found that Celsius presented a plausible case that Tether's actions involved US-based communications and financial accounts. This ruling establishes sufficient domestic ties for US jurisdiction, despite Tether's incorporation in the British Virgin Islands. The decision affects how collateral liquidation operates during market stress periods, with Celsius claiming the rushed Bitcoin sale cost the company over $4 billion at current prices compared to proper liquidation procedures. This represents one of the largest financial disputes in cryptocurrency history.

The ruling sets a precedent for US courts exercising jurisdiction over foreign cryptocurrency companies. Tether argued that the case represented an improper application of US bankruptcy law to British Virgin Islands entities. The judge rejected this defense after finding domestic operational connections through US personnel and banking relationships. This decision may prompt stricter oversight requirements for offshore firms managing US-based assets and could reshape how global crypto companies handle collateral during market downturns and establish new standards for cross-border lending disputes.

The case highlights the risks in cryptocurrency lending arrangements where collateral management lacks clear regulatory frameworks. Industry observers expect increased focus on liquidation procedures and timing requirements as institutional participation grows. Tether maintains that its actions were necessary to preserve stablecoin reserves, while Celsius seeks recovery of assets it claims were improperly liquidated below market value.