Celsius Wins Court Approval to Sue Tether Over 39,500 Bitcoin Liquidation

A US bankruptcy judge has ruled that Celsius Network can proceed with its $4 billion lawsuit against Tether. This decision allows the case to move forward, potentially reshaping how collateral is handled in crypto lending agreements. The lawsuit centers on the liquidation of nearly 40,000 Bitcoin during the height of Celsius’s 2022 collapse, raising serious questions about contractual obligations, jurisdiction, and good faith practices in the crypto industry.

At the heart of the case is Celsius’s accusation that Tether wrongfully sold over 39,500 Bitcoin that had been pledged as collateral. Celsius claims the liquidation occurred in June 2022 at an average price of $20,656, far below prevailing market rates at the time. According to court filings, Celsius argues that Tether bypassed a contractually required 10-hour waiting period, conducting what it described as a “fire sale” of its digital assets. The proceeds, Celsius alleges, were then moved to Bitfinex accounts controlled by Tether, further deepening the breach of trust between the two entities.

Tether had sought to dismiss the case in full, but the court allowed several of Celsius’s central claims to proceed. The judge upheld Celsius’s allegations of breach of contract and fraudulent transfer, stating that the company had presented a “sufficiently plausible” case to warrant further examination. Tether had argued that the lawsuit represented an improper attempt to apply US bankruptcy law to a foreign entity. However, the judge rejected this defense, ruling that the actions in question had enough domestic ties, including US-based personnel, communications, and financial accounts, to fall under American jurisdiction. This finding significantly strengthens Celsius’s position and sets the stage for the case to advance toward trial.

Celsius, once one of the largest players in crypto lending, contends that Tether’s actions led to more than $4 billion in losses at today’s Bitcoin prices. The dramatic plunge in the price of Bitcoin in mid-2022 severely impacted Celsius’s solvency, prompting the company’s bankruptcy and triggering a lengthy legal and financial restructuring. Following 18 months of court proceedings, Celsius emerged from bankruptcy in January 2024 and has since begun repaying creditors. The court’s recent ruling opens the door for a potential trial that will delve into whether Tether acted unlawfully when it moved to liquidate the BTC without honoring contract terms. The judge emphasized that factual disputes, particularly surrounding the timing and method of the asset sale, must be resolved in court.

For Tether, the lawsuit adds to a growing list of legal and regulatory challenges it faces as the most prominent issuer of stablecoins. Despite its denials of wrongdoing, the company must now prepare to defend its practices in court, particularly those involving collateral management and fund transfers. Tether has maintained that its actions were necessary to preserve stablecoin reserves and prevent broader market disruption. The timing of this legal escalation comes as Tether expands its footprint in Bitcoin markets, recently acquiring a majority stake in Twenty One Capital and transferring nearly $4 billion worth of BTC to related addresses.