Celsius Wins Court Battle Against Tether Over Bitcoin Liquidation

A US bankruptcy judge has ruled that Celsius Network’s lawsuit against stablecoin giant Tether can proceed. The judge denied Tether’s attempt to dismiss allegations that it improperly liquidated Celsius’s Bitcoin collateral during the lender’s collapse. This decision allows Celsius’s lawsuit, which seeks to reclaim over $4 billion in Bitcoin, to move forward.

Celsius alleges that Tether sold over 39,500 Bitcoin in June 2022, using the proceeds to cover Celsius’s $812 million debt without following agreed-upon procedures. The lender claims that Tether’s actions breached their lending agreement, violated principles of good faith under British Virgin Islands law, and amounted to fraudulent and preferential transfers avoidable under US bankruptcy rules. The dispute centers on a margin call Tether issued as Bitcoin prices fell sharply. Celsius argued that Tether sold its collateral before a required 10-hour waiting period, offloading the BTC at an average price of $20,656, before transferring the assets to its own Bitfinex accounts. Celsius said the rushed liquidation deprived it of BTC now worth more than $4 billion.

The lender also argued Tether’s actions involved US-based communications, personnel, and bank accounts, giving American courts jurisdiction despite Tether being incorporated offshore. The judge sided with Celsius, finding the alleged misconduct sufficiently “domestic” in nature to keep key claims alive, including breach of contract, fraudulent transfer, and preference allegations. This ruling is significant as it underscores the reach of US courts in cases involving offshore entities with substantial US-based activities.

Last year, Tether sought to dismiss the case outright, arguing the US court had no jurisdiction and that Celsius’s claims were invalid. While the judge dismissed some counts, the core allegations were allowed to proceed. This development is crucial for Celsius creditors, who have already received over $2.5 billion in distributions. The decision to block Mashinsky from claiming any share of the failed crypto lender’s bankruptcy proceeds frees up funds for creditor payouts under Celsius’s Chapter 11 plan. This ruling follows a May 2025 agreement between Mashinsky and the Celsius litigation team, ensuring that reserved cash, crypto, and MiningCo shares are released for creditor benefits.

In summary, the judge’s decision to allow Celsius’s lawsuit against Tether to proceed is a significant development in the ongoing legal battle. The ruling underscores the complexity of cross-border legal disputes in the cryptocurrency industry and the reach of US courts in cases involving offshore entities with substantial US-based activities. The outcome of this lawsuit could have far-reaching implications for the cryptocurrency industry, particularly in how lenders and stablecoin issuers manage collateral and margin calls. The decision also highlights the importance of adhering to agreed-upon procedures and principles of good faith in financial transactions, especially in the volatile cryptocurrency market.