A major legal breakthrough has been granted to bankrupt crypto lender Celsius Network, as a New York bankruptcy judge has allowed it to move forward with the majority of its $4.3 billion lawsuit against Tether, the issuer of the world’s largest stablecoin.
Celsius Alleges Improper Liquidation of 40,000 Bitcoins
In its lawsuit, Celsius accuses Tether of liquidating nearly 40,000 BTC — worth over $4.3 billion at today’s prices — in June 2022, just before Celsius suspended withdrawals. The company claims Tether failed to give the required 10-hour window to post additional collateral, as outlined in their lending agreement.
“If Celsius had been given the opportunity to meet the collateral demand … it could have avoided the disposition of its Bitcoin,” Celsius’ legal team stated.
They argue that this liquidation, which took place near the bottom of the crypto market, was done solely to benefit Tether as a creditor, rather than protecting broader lender interests.
Tether Calls the Lawsuit a “Shakedown”
Tether has strongly denied the claims, calling the lawsuit a “baseless, shameless litigation money grab.” According to their version, Celsius executives themselves authorized the liquidation to help settle a debt of approximately 815 million USDT.
“This lawsuit seeks to improperly impose the costs of Celsius’ mismanagement on Tether,” the company said in a previous press release.
Judge Rejects Tether’s Dismissal Attempt
In a ruling issued on June 30, Chief Bankruptcy Judge Martin Glenn rejected Tether’s argument that oral permission from then-CEO Alex Mashinsky (now serving 12 years in prison for fraud) was enough to justify immediate liquidation. The judge emphasized that failure to honor the contractual 10-hour notice period could still constitute breach of contract.
However, one count — involving the alleged breach of the “covenant of good faith and fair dealing” under British Virgin Islands law — was dismissed without prejudice, giving Celsius an option to revise and refile that portion.
What’s Next for the Case?
With most of the case still active, Celsius now has the legal ground to seek compensation for damages and potentially recover part of the lost Bitcoin value. If successful, this case could set a precedent for crypto loan contract enforcement and how collateral management is handled during financial distress.
Key Points:
- Celsius can move forward with its $4.3B lawsuit against Tether.
- The case involves the liquidation of 40,000 BTC during Celsius’ financial crisis.
- Judge Glenn rejected Tether’s argument of oral permission, upholding contract terms.
- One count was dismissed under BVI law but can be amended and refiled.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.