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Key Notes
- A U.S.court has allowed Celsius to proceed with its $4 billion lawsuit against Tether.
- Tether argued that the case should be dismissed because Celsius Network is not a U.S.company.
- Celsius alleges that Tether improperly liquidated its Bitcoin collateral.
A United States court has ruled that Celsius Network can proceed with its multibillion-dollar lawsuit against Tether, alleging a breach of their lending agreement. The judge rejected key points in Tether’s motion to dismiss, allowing Celsius Network’s claims to move forward.
The crypto lending and Bitcoin BTC $109 215 24h volatility: 3.2% Market cap: $2.17 T Vol. 24h: $34.47 B mining firm, which filed for bankruptcy, alleged that Tether “improperly” liquidated the Bitcoin collateral it provided following its collapse.
In the court documents, Celsius Network alleges that Tether carried out a “fire sale” of over 39,500 Bitcoin in June 2022, using the proceeds to offset Celsius’s $812 million debt without following the stipulations in the agreement.
Filed in New York on June 30, the bankrupt crypto lender claims that Tether breached the duty of “good faith and fair dealing” as defined under British Virgin Islands law.
Celsius further asserts that Tether’s actions may constitute fraudulent and preferential transfers, which are subject to avoidance under the United States Bankruptcy Code.
Celsius alleges that after a decline in Bitcoin prices, Tether issued a margin call and proceeded to liquidate the collateral before the required 10-hour waiting period had elapsed.
As a result, the BTC collateral was reportedly sold below market value, at an average price of $20,656. Following the sale, the assets were allegedly transferred to Tether’s Bitfinex accounts.
This legal action follows Celsius Network’s exit from Chapter 11 bankruptcy on January 31, 2024, after which the company began repaying its creditors.
Celsius network’s court filing
Celsius Network claims that Tether unlawfully liquidated Bitcoin collateral without sticking to the mutually agreed-upon terms, resulting in a loss of $4 billion worth of BTC based on current valuations.
The bankrupt crypto lending firm also claims that Tether engaged U.S.-based staff, communication channels, and financial institutions, thereby creating enough connections to fall under U.S. legal jurisdiction.
On the other hand, Tether argued that the U.S. courts lack authority over the matter and believed that the lawsuit should be entirely dismissed. In August 2024, Tether filed a motion seeking full dismissal of the case. Tether argued that Celsius was not a U.S. company.
Celsius noted that “transactions involving cryptocurrency connected to a U.S.-based person or entity can be considered a domestic transaction and notes, in any event, that Celsius’s cryptocurrency was located in the United States.”
The U.S. court partially denied Tether’s request, dismissing some of Celsius’s claims but permitting the lawsuit to move forward based on allegations of breach of contract, fraudulent transfer, and preference claims.
On a positive note for Tether, the company recently acquired a stake in Elemental Altus, a firm specializing in gold royalties. This move highlights Tether’s strategic efforts to incorporate long-term, stable assets such as gold and Bitcoin into its ecosystem.
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