Celsius achieves partial win in Tether legal battle

A recent ruling by a US bankruptcy judge has cleared the way for Celsius Network’s lawsuit against Tether to proceed, marking a significant development in the legal battle between the two cryptocurrency firms. Despite Tether’s efforts to have the lawsuit dismissed, the judge partially denied their motion, allowing Celsius to pursue claims that Tether mishandled Celsius’s Bitcoin collateral during a period of financial distress.

The lawsuit, which was initiated in New York, alleges that Tether engaged in a rushed sale of over 39,500 Bitcoin in June 2022, using the proceeds to offset Celsius’s substantial debt without adhering to the agreed-upon protocols. Celsius maintains that Tether’s actions violated the terms of their lending agreement, breached principles of good faith, and amounted to fraudulent and preferential transactions that could be challenged under US bankruptcy laws. The heart of the dispute lies in a margin call that Tether issued to Celsius amid a sharp decline in Bitcoin prices. Celsius contends that Tether sold off its collateral prematurely, liquidating the Bitcoin at a price below the prevailing market rates and subsequently transferring the funds to its Bitfinex accounts. According to Celsius, Tether’s hasty liquidation caused substantial losses amounting to over $4 billion in terms of current Bitcoin valuations.

In response to Tether’s contention that the US court lacked jurisdiction over the matter, the judge determined that Celsius had presented a plausible argument that the transactions in question had domestic implications, allowing the lawsuit to proceed. While Tether succeeded in having certain claims dismissed, the court upheld Celsius’s core allegations related to breach of contract, fraudulent transfers, and preferential treatment. This decision sets the stage for a legal showdown between the two parties, with potentially far-reaching implications for the cryptocurrency industry as a whole.

Celsius, once a major player in the crypto lending space, emerged from a grueling 18-month restructuring process in January 2024 and is now focused on repaying its creditors. The court’s decision to greenlight the lawsuit underscores the significance of Celsius’s claims against Tether and underscores the broader industry’s ongoing challenges around regulation, transparency, and accountability. The outcome of this legal battle will be closely watched by market participants and regulators alike, as it could establish important precedents for future disputes involving cryptocurrency liquidations and market integrity issues.