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A U.S. bankruptcy judge has ruled that Celsius Network's multi-billion dollar lawsuit against Tether can proceed. The lawsuit alleges that Tether improperly liquidated Celsius's Bitcoin collateral during the crypto lender's collapse, leading to significant losses for Celsius. This decision marks a crucial step in Celsius's efforts to recover funds and repay creditors following its bankruptcy.
Judge Greenlights Celsius's $4 Billion Bitcoin Lawsuit Against Tether
A U.S. bankruptcy judge has given the green light for Celsius Network's multi-billion dollar lawsuit against Tether to move forward. The lawsuit, which seeks to recover over $4 billion in Bitcoin, centers on allegations that Tether improperly liquidated Celsius's Bitcoin collateral during the crypto lender's financial collapse in June 2022.
Key Allegations and Claims
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Improper Liquidation: Celsius claims Tether conducted a "fire sale" of over 39,500 Bitcoin (BTC) without adhering to agreed-upon procedures, applying the proceeds against Celsius's $812 million debt.
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Breach of Contract: The lawsuit alleges that Tether's actions breached their lending agreement and violated principles of "good faith and fair dealing" under British Virgin Islands law.
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Fraudulent and Preferential Transfers: Celsius also asserts that Tether's actions constituted fraudulent and preferential transfers, which are avoidable under the U.S. Bankruptcy Code.
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Premature Sale: A central point of contention is Celsius's argument that Tether sold its collateral before a stipulated 10-hour waiting period, liquidating the BTC at an average price of $20,656, which Celsius claims was below market levels.
Jurisdiction and Dismissal Attempts
Tether had sought to dismiss the lawsuit entirely, arguing that the U.S. court lacked jurisdiction and that Celsius's allegations failed to state valid claims. However, the judge largely rejected these arguments, agreeing with Celsius that the alleged misconduct and transfers had sufficient "domestic" ties to warrant U.S. jurisdiction. While some counts were dismissed, the court allowed Celsius's key claims, including breach of contract, fraudulent transfer, and preference claims, to proceed.
Celsius's Path Forward
Celsius, once a major player in the crypto lending space, officially emerged from bankruptcy on January 31, 2024, after an 18-month restructuring process. The company is now focused on repaying its creditors. This lawsuit against Tether is a significant component of Celsius's ongoing efforts to maximize recoveries for those affected by its collapse.
Tether's Broader Activities
Meanwhile, Tether continues to expand its presence in the crypto market. Despite speculation, Tether CEO Paolo Ardoino has dismissed plans for an initial public offering (IPO). The company has also been actively increasing its Bitcoin holdings, becoming a majority owner of Jack Mallers’ Twenty One Capital and transferring substantial amounts of BTC to addresses tied to its platform.
Sources
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Celsius $4B Bitcoin Lawsuit Against Tether Moves Forward, Cointelegraph.
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