Judge Allows Celsius $4 Billion Bitcoin Lawsuit Against Tether to Proceed
A US bankruptcy judge ruled Monday that Celsius Network's lawsuit against Tether can proceed despite attempts to dismiss the case. According to Cointelegraph, the court denied key parts of Tether's motion to dismiss claims over the liquidation of 39,500 Bitcoin during Celsius's collapse in June 2022.
Celsius alleges Tether executed a "fire sale" of the Bitcoin collateral at an average price of $20,656 per coin. The bankruptcy lender claims this violated their lending agreement and constituted fraudulent transfers under US law. Court documents show Tether applied the proceeds against Celsius's $812 million debt without following agreed procedures.
The judge found Celsius presented a plausible case that Tether's actions involved US-based communications and financial accounts. This ruling establishes sufficient domestic ties for US jurisdiction despite Tether's incorporation in the British Virgin Islands and Hong Kong.
Why This $4 Billion Case Matters for Crypto Lending
The court decision affects how collateral liquidation operates during market stress periods. Celsius claims the rushed Bitcoin sale cost the company over $4 billion at current prices compared to proper liquidation procedures. According to Invezz, this represents one of the largest financial disputes in cryptocurrency history.
Current data shows institutional crypto lending markets processed $3.4 billion in counterparty defaults during 2024. CoinLaw reports that 52% of institutional investors now participate in crypto lending programs, with average collateralization ratios reaching 160% to prevent liquidation events.
We reported that 15 US states are establishing Bitcoin reserves, creating new institutional demand that makes proper collateral handling procedures more important for market stability. These government entities require clear liquidation protocols before entering crypto lending arrangements.
Industry Implications for Offshore Crypto Companies
The ruling sets precedent for US courts exercising jurisdiction over foreign cryptocurrency companies. Tether argued the case represented improper application of US bankruptcy law to British Virgin Islands entities. The judge rejected this defense after finding domestic operational connections through US personnel and banking relationships.
This decision may prompt stricter oversight requirements for offshore firms managing US-based assets. According to CoinJournal, the outcome could reshape how global crypto companies handle collateral during market downturns and establish new standards for cross-border lending disputes.
The case highlights risks in cryptocurrency lending arrangements where collateral management lacks clear regulatory frameworks. Industry observers expect increased focus on liquidation procedures and timing requirements as institutional participation grows. Tether maintains its actions were necessary to preserve stablecoin reserves, while Celsius seeks recovery of assets it claims were improperly liquidated below market value.
