A U.S. bankruptcy judge has ruled that Celsius Network's multi-billion dollar lawsuit against Tether can proceed, partially rejecting Tether's motion to dismiss the claims regarding its "improper" liquidation of Celsius' Bitcoin collateral, which occurred during the collapse of the cryptocurrency lending institution.
According to court documents filed in New York on Monday, Celsius accused Tether of executing a "fire sale" of over 39,500 Bitcoin (BTC) in June 2022, using the proceeds to offset Celsius' $812 million debt, but failing to follow the agreed-upon procedures.
Celsius claims that Tether's actions violated their lending agreement, breached the principles of "good faith and fair dealing" under British Virgin Islands law, and constituted fraudulent and preferential transfers that are avoidable under U.S. bankruptcy law.
At the heart of the complaint is Tether's issuance of a margin call notice during a significant drop in Bitcoin prices. Celsius argues that Tether sold its collateral before the 10-hour waiting period, liquidating BTC at an average price of $20,656 (below market levels), and subsequently transferred the assets to its own Bitfinex account.
The documents allege that Tether's liquidation caused Celsius to lose over $4 billion in BTC based on current prices.
Celsius further claims that Tether's actions involved communications, personnel, and financial accounts in the U.S., establishing sufficient connections for U.S. jurisdiction despite Tether being registered in the British Virgin Islands and Hong Kong.
The judge agreed that Celsius presented a reasonable case that the transfers and alleged misconduct were essentially "domestic" in nature, rejecting Tether's argument that these claims represented an improper extraterritorial application of U.S. bankruptcy law.
In August 2024, Tether attempted to fully dismiss the lawsuit, claiming that U.S. courts lacked jurisdiction and that Celsius' allegations failed to state a valid claim. While the court dismissed some claims, it allowed Celsius' key breach of contract, fraudulent transfer, and preferential creditor claims to proceed.
Celsius was once one of the largest cryptocurrency lending institutions and officially exited bankruptcy on January 31, 2024, after an 18-month restructuring process. The company is now repaying creditors.
In June, Tether CEO Paolo Ardoino stated that the company had no plans for an IPO. Ardoino responded to speculation about a potential Tether IPO, denying the idea, although observers believe that a public offering could value the stablecoin giant at over $500 billion, surpassing companies like Costco or Coca-Cola.
While calling the $515 billion valuation a "beautiful number," Ardoino suggested that considering its substantial Bitcoin and gold reserves, this might even underestimate Tether.
Meanwhile, Tether continues to expand its Bitcoin footprint, becoming a major shareholder in 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 associated with the platform.
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Original article: “Judge Rules Celsius' $4 Billion Bitcoin (BTC) Lawsuit Against Tether Can Proceed”
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