A US bankruptcy judge ruled that Celsius Network’s multibillion-dollar lawsuit against Tether can proceed, denying in part Tether’s attempt to dismiss claims that it “improperly” liquidated Celsius’s Bitcoin collateral during the crypto lender’s collapse.
According to court documents filed in New York on Monday, Celsius alleges that Tether (USDT) executed a “fire sale” of over 39,500 Bitcoin (BTC) in June 2022, applying the proceeds against Celsius’s $812 million debt without following agreed-upon procedures.
Celsius claims Tether’s actions breached their lending agreement, violated “good faith and fair dealing” under British Virgin Islands law, and constituted fraudulent and preferential transfers avoidable under the US Bankruptcy Code.
The complaint centers on a margin call Tether issued as Bitcoin prices plunged. Celsius argues that Tether sold its collateral before a 10-hour waiting period, liquidating the BTC at an average price of $20,656 (below market levels) and later transferring the assets to its own Bitfinex accounts.
Related: Celsius creditors allege 30% less compensation than promised during bankruptcy
Celsius lost $4 billion in Tether BTC sale
The filing alleges that Tether’s liquidation cost Celsius over $4 billion worth of BTC at current prices.
Celsius further claims Tether’s actions involved US-based communications, personnel and financial accounts, establishing sufficient ties for US jurisdiction despite Tether’s incorporation in the British Virgin Islands and Hong Kong.
The judge agreed Celsius made a plausible case that the transfers and alleged misconduct were “domestic” in nature, rejecting Tether’s argument that the claims represent an impermissible extraterritorial application of US bankruptcy law.
In August 2024, Tether sought to dismiss the lawsuit entirely, claiming that the US court lacked jurisdiction and that Celsius’s allegations fail to state valid claims. While the court dismissed some counts, it allowed Celsius’s key breach of contract, fraudulent transfer and preference claims to proceed.
Celsius, once among crypto’s largest lenders, officially exited bankruptcy on Jan. 31, 2024, after an 18-month restructuring process. The company is now repaying creditors.
Related: Tether plans to open-source Bitcoin mining OS; CEO says ‘no need’ for 3rd party vendors
Tether CEO dismisses IPO plans
In June, Tether CEO Paolo Ardoino said the company has no plans to go public. Ardoino responded to speculation about a potential Tether IPO, dismissing the idea even as observers suggested a public offering could value the stablecoin giant at over $500 billion, larger than corporations like Costco or Coca-Cola.
While calling a $515 billion valuation a “beautiful number,” Ardoino suggested it might even undervalue Tether, considering its sizable Bitcoin and gold reserves.
Meanwhile, Tether continues to expand its Bitcoin footprint, becoming the majority owner of Jack Mallers’ Twenty One Capital, now the world’s third-largest corporate Bitcoin holder. Tether recently transferred nearly 37,230 BTC, worth about $3.9 billion, to addresses tied to the platform.
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