Celsius Lawsuit Against Tether For Allegedly Improper Bitcoin Liquidation to Proceed

The US Bankruptcy Court for the Southern District of New York has ruled that Celsius Network’s multibillion-dollar lawsuit against Tether can move forward. Amin Hasqshanas writes in Cointelegraph that the lawsuit, Celsius Network LLC, et al. v. Tether Limited et al, concerns Celsius’s allegation that Tether wrongfully liquidated more than 39,000 Bitcoin it was holding as collateral in June 2022, during Celsius’s financial collapse.

While some claims were dismissed, the core elements will proceed in court. 

Celsius argues that Tether’s actions violated the lending agreement between the two crypto firms and seeks damages exceeding $4 billion based on current Bitcoin valuations.

The dispute stems from a margin call made by Tether amid a sharp decline in Bitcoin prices. Celsius asserts that Tether ignored a 10-hour contractual waiting period and sold the Bitcoin at an average price of $20,656, which was below market rates at the time.

The complaint further alleges that Tether transferred the liquidated assets to its own Bitfinex accounts as partial payment of Celsius’s $812 million debt.

Celsius argues that the actions not only breached contract terms but also constituted fraudulent and preferential transfers under US bankruptcy law.

Tether is incorporated offshore, but Celsius argues that the relevant communications and financial transactions took place in the United States, providing grounds for domestic jurisdiction.

The judge agreed that Celsius presented a “plausible” claim involving domestic activity and denied Tether’s motion to dismiss the key causes of action, including breach of contract and fraudulent transfers.

Tether had attempted to avoid US litigation entirely, citing jurisdictional and legal insufficiencies.

Attorneys should note the extent to which a US bankruptcy court claims jurisdiction over international entities operating within domestic financial systems. There was also heavy scrutiny of the decision to sell Celsius’s collateral below market rate, which Tether claims cost it billions of dollars.