- Celsius claims Tether’s 2022 Bitcoin sale broke contract terms.
- Over 39,500 BTC were liquidated at $20,656 average price.
- Claims include breach of contract and fraudulent transfer.
Celsius Network’s efforts to hold Tether accountable for a $4 billion Bitcoin liquidation just cleared a major hurdle in US court.
A bankruptcy judge has now allowed Celsius to proceed with legal action against Tether, despite the stablecoin giant’s attempts to halt the case on jurisdictional grounds.
The lawsuit centres on claims that Tether prematurely and unfairly sold nearly 40,000 BTC during Celsius’s collapse in mid-2022, in breach of a contractual agreement and US bankruptcy laws.
The ruling could mark a turning point for how global crypto firms are treated in American courts, especially when assets are involved that were managed, sold, or transferred through US-linked systems.
While the court dismissed some peripheral allegations, it upheld key claims, including breach of contract and fraudulent transfer, allowing Celsius’s case to continue.
Celsius accuses Tether of early Bitcoin liquidation breach
The dispute dates back to June 2022, when Celsius was already reeling from the broader crypto market crash. Court filings reveal that Tether had lent money to Celsius and, in return, received collateral in Bitcoin.
Celsius now alleges that Tether liquidated 39,500 BTC at an average price of $20,656 without providing the contractually required 10-hour notice period.
The assets, according to Celsius, were liquidated during a time of extreme market volatility, and sold significantly below market value. Celsius claims the early sale resulted in a loss of over $4 billion based on current Bitcoin prices.
Moreover, the company alleges that Tether later transferred the liquidated BTC to Bitfinex, a platform operated by Tether’s sister company, raising concerns around related-party dealings and asset custody.
US court rejects Tether’s jurisdictional challenge
In its defence, Tether had argued that the case should be thrown out because it operates from the British Virgin Islands and Hong Kong. The company said US courts had no jurisdiction over its business.
However, the judge disagreed, pointing to the fact that Tether used US-based staff, bank accounts, and communication systems in its dealings with Celsius.
The court ruled that Tether’s actions were sufficiently “domestic” to fall under US legal scrutiny.
This decision now paves the way for Celsius to pursue several key legal charges including breach of contract, fraudulent transfer, and preferential treatment of certain creditors—allegations that strike at the core of how digital asset lenders and stablecoin issuers operate.
Broader implications for crypto lending and stablecoin governance
Legal experts say the outcome of this case could influence the regulatory treatment of stablecoin issuers, particularly in the US.
If Celsius is able to demonstrate that Tether mismanaged client assets or failed to honour notice periods during market stress, it may prompt calls for stricter oversight on asset liquidation procedures, especially for offshore firms operating through US financial infrastructure.
The case may also set a precedent for future cross-border lending disputes and clarify whether offshore crypto companies can be held accountable in US bankruptcy proceedings.
The outcome could therefore impact how other large digital asset firms manage collateral and liquidity risk during market downturns.
Tether grows market presence amid legal scrutiny
Despite the ongoing legal challenges, Tether has continued to expand its footprint in the crypto sector. The company recently acquired a majority stake in Twenty One Capital, a firm associated with Strike CEO Jack Mallers.
This move connects Tether to the third-largest corporate Bitcoin holder globally.
In another significant development, Tether transferred around 37,230 BTC—currently worth $3.9 billion—to addresses associated with its trading operations.
The company appears to be consolidating its Bitcoin reserves even as it navigates the legal fallout from the Celsius collapse.
Meanwhile, speculation continues over Tether’s valuation and a possible initial public offering.
However, CEO Paolo Ardoino has denied any plans for a public listing, stating that the firm is not preparing for an IPO despite rumoured valuations nearing $500 billion.
As the Celsius case moves into the next phase, attention will remain on how Tether responds to mounting legal pressure in one of the largest financial disputes in crypto history.
