Celsius Wins Legal Victory Against Tether in Bitcoin Liquidation Case

Celsius Network has secured a significant legal victory in its ongoing lawsuit against Tether. A US bankruptcy judge has ruled that the multibillion-dollar lawsuit can proceed, rejecting key parts of Tether’s motion to dismiss the case. The lawsuit, filed in New York, alleges that Tether improperly liquidated over 39,500 Bitcoin belonging to Celsius in June 2022, during the crypto lender’s collapse. Celsius claims that Tether acted in bad faith by executing a “fire sale” of the collateral at an average price of $20,656—below market value—and applied the proceeds to an $812 million loan without observing a mandatory 10-hour waiting period. The funds were reportedly later moved to Tether’s affiliated Bitfinex accounts.

Celsius alleges that Tether’s actions breached their lending agreement, violated good faith obligations under British Virgin Islands law, and constituted fraudulent and preferential transfers under US bankruptcy regulations. These allegations are based on the premise that, despite Tether being incorporated in the British Virgin Islands and Hong Kong, the actions in question involved US-based elements, including personnel, communications, and financial accounts. The judge agreed that the case had enough domestic ties, countering Tether’s claim that the lawsuit represented an overreach of US jurisdiction.

Although some claims were dismissed, the court allowed Celsius to move forward with its core allegations of breach of contract and improper transfer of assets. The company argues that the premature liquidation cost it over $4 billion at current Bitcoin prices. Celsius was once a major player in crypto lending, and exited bankruptcy in January of 2024 after 18 months of restructuring. It has since started repaying creditors.

Tether CEO Paolo Ardoino recently dismissed speculation about the company launching an IPO, despite industry chatter valuing Tether at over $500 billion. Ardoino called such a valuation a “beautiful number” but hinted that it may still undervalue Tether, given its vast reserves in Bitcoin and gold. The company is also building its Bitcoin holdings, including a recent transfer of nearly 37,230 BTC—valued at approximately $3.9 billion—to addresses associated with its majority-owned Twenty One Capital, now the third-largest corporate Bitcoin holder globally.

This legal victory for Celsius is a significant development in the ongoing saga of the crypto industry’s tumultuous 2022. The lawsuit highlights the complex legal and financial issues that arise when crypto companies operate across multiple jurisdictions and regulatory environments. The outcome of this case could set important precedents for how similar disputes are handled in the future, particularly in cases involving cross-border transactions and the application of US bankruptcy law.

The ruling also underscores the importance of good faith and transparency in financial transactions, especially in the volatile world of cryptocurrency. Celsius’s allegations of bad faith and fraudulent transfers, if proven, could have far-reaching implications for the industry, potentially leading to stricter regulations and oversight. The case serves as a reminder that even in the decentralized world of crypto, legal and regulatory frameworks still play a crucial role in ensuring fairness and accountability.

As the lawsuit moves forward, both Celsius and Tether will need to navigate the complex legal landscape and present their cases to the court. The outcome of this legal battle will be closely watched by industry participants and regulators alike, as it could shape the future of crypto lending and the broader cryptocurrency market. The case also highlights the need for clear and consistent regulatory frameworks that can adapt to the rapidly evolving nature of the crypto industry.