Key Allegations Center on Improper BTC Liquidation During Market Crash
A U.S. bankruptcy judge has allowed Celsius Network’s $4 billion lawsuit against Tether to move forward, rejecting Tether’s key motion to dismiss. The ruling marks a significant step in one of the largest legal disputes in crypto lending history, with Celsius accusing Tether of misconduct during its 2022 collapse.
The lawsuit, filed in a New York bankruptcy court, alleges that Tether improperly liquidated over 39,500 BTC held as collateral when Bitcoin prices were crashing in June 2022. The liquidation, Celsius claims, violated contractual terms and led to massive financial losses.
Celsius Alleges Contract Breach and Fraud
According to court documents, Tether issued a margin call as BTC prices fell, but liquidated Celsius’s Bitcoin before the agreed 10-hour waiting period, allegedly selling the coins at an average of $20,656 — well below market prices.
Celsius argues that this “fire sale” liquidation was not only premature but also executed in bad faith, breaching their lending agreement and violating British Virgin Islands contract law. The suit also claims that Tether transferred the proceeds to its Bitfinex accounts, effectively seizing the assets.
Based on current prices, Celsius estimates the BTC sold would now be worth over $4 billion, making this case financially and reputationally significant for both parties.
Jurisdiction and U.S. Bankruptcy Law
Tether, incorporated in the British Virgin Islands and Hong Kong, tried to dismiss the case on jurisdictional grounds, claiming the actions were non-domestic. However, the judge found that the alleged misconduct involved U.S.-based personnel, financial infrastructure, and communications — satisfying domestic nexus under U.S. bankruptcy law.
While some lesser charges were dismissed, the judge allowed the main breach of contract, fraudulent transfer, and preference claims to proceed.
Background: Celsius Collapse and Tether’s Role
Celsius, once a major crypto lending platform, collapsed in mid-2022 during a wave of crypto liquidations. It officially exited bankruptcy in January 2024 after an 18-month restructuring. This lawsuit represents part of its effort to recover assets for creditors.
Tether, known for issuing the USDT stablecoin, is one of the most systemically important players in the crypto space. It has faced regulatory scrutiny and transparency questions in the past but remains deeply embedded in global crypto markets.
Wider Implications for Crypto Lending and Jurisdiction
This case could set a legal precedent for how cross-border digital asset disputes are handled under U.S. bankruptcy law, especially involving stablecoin issuers and offshore entities. It also highlights counterparty risk in crypto lending, where collateral management and liquidation protocols can become flashpoints during market turmoil.
What’s Next?
Celsius is expected to pursue discovery and trial preparation, while Tether may appeal parts of the ruling. The case’s outcome could influence how future crypto lending contracts are written — especially around liquidation rules and jurisdiction clauses.
The message from the court is clear: if the allegations involve U.S. markets and financial systems, they’re not immune from scrutiny.
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.