A U.S. bankruptcy judge has ruled that Celsius Network’s multibillion-dollar lawsuit against stablecoin issuer Tether can move forward, rejecting in part Tether’s attempts to dismiss claims that it improperly liquidated Celsius’s Bitcoin (BTC) collateral during the crypto lender’s collapse.
According to court documents filed in New York, Celsius alleges that Tether executed a “fire sale” of over 39,500 BTC in June 2022, applying the proceeds against Celsius’s $812 million debt without adhering to agreed-upon procedures. Celsius claims these actions constituted a breach of their lending agreement, violated “good faith and fair dealing” under British Virgin Islands law, and represent fraudulent and preferential transfers avoidable under the U.S. Bankruptcy Code.
The core of the complaint centers on a margin call issued by Tether as Bitcoin prices plummeted. Celsius argues that Tether sold its collateral before a stipulated 10-hour waiting period expired, liquidating the BTC at an average price of $20,656, which Celsius contends was below market levels at the time. The crypto lender further alleges that Tether subsequently transferred these assets to its own Bitfinex accounts.
The filing claims that Tether’s liquidation resulted in a loss to Celsius of over $4 billion worth of BTC at current market prices.
Despite Tether’s incorporation in the British Virgin Islands and Hong Kong, Celsius argued that the company’s actions involved U.S.-based communications, personnel, and financial accounts, establishing sufficient ties for U.S. jurisdiction. The judge concurred, finding Celsius presented a plausible case that the transfers and alleged misconduct were “domestic” in nature, thereby rejecting Tether’s argument of extraterritorial application of U.S. bankruptcy law.
Tether had sought to dismiss the lawsuit entirely in August 2024, citing a lack of U.S. court jurisdiction and failure by Celsius to state valid claims. While the court dismissed some counts, it permitted Celsius’s key breach of contract, fraudulent transfer, and preference claims to proceed.
Celsius, once a prominent crypto lender, successfully exited bankruptcy on January 31, 2024, after an 18-month restructuring process and is currently in the process of repaying creditors.
