Celsius and Tether Lawsuit Advances in US Court
Legal Proceedings Surrounding $4 Billion Bitcoin Sale
Celsius Network is making strides in its legal battle against Tether concerning a significant Bitcoin liquidation that occurred during Celsius’s 2022 financial troubles. A US bankruptcy court has granted Celsius the opportunity to move forward with its lawsuit, dismissing Tether’s efforts to challenge the case based on jurisdictional claims.
The core of the dispute centers around allegations that Tether sold nearly 40,000 BTC prematurely, breaching a contractual agreement and relevant bankruptcy laws in the United States. This ruling could significantly impact how crypto companies are viewed under US law, particularly in scenarios where assets are managed or transferred using US-based systems.
Allegations of Contract Breach by Tether
The conflict traces back to June 2022, at a time when Celsius was grappling with a downturn in the cryptocurrency market. Court documents indicate that Tether had extended a loan to Celsius, receiving Bitcoin as collateral. Celsius claims that Tether liquidated 39,500 BTC at an average price of $20,656 without adhering to the required 10-hour notice period specified in their agreement.
Celsius argues that the liquidation took place amid a tumultuous market, resulting in a sale price that was significantly below the market value. According to Celsius, this early liquidation led to losses exceeding $4 billion, based on current Bitcoin market prices. The company also expresses concern that Tether transferred the liquidated BTC to Bitfinex, a trading platform linked to Tether, raising questions about associated parties’ dealings and the handling of assets.
Court Rejects Tether’s Jurisdictional Arguments
In its defense, Tether contended that the case should be dismissed, citing its primary operations in the British Virgin Islands and Hong Kong, claiming that US courts lacked jurisdiction over its business affairs. However, the presiding judge disagreed, noting that Tether engaged with US personnel, bank accounts, and communication methods when dealing with Celsius.
This decision empowers Celsius to pursue significant claims against Tether, such as breach of contract and fraudulent transfer, which are crucial to understanding the operations of digital asset lenders and stablecoin providers.
Implications for Crypto Lending and Stablecoin Regulation
Experts suggest that the outcome of this lawsuit may set important precedents regarding the regulatory landscape for stablecoin issuers in the US. If Celsius successfully proves that Tether mishandled client assets or failed to provide appropriate notice during market instability, it could lead to increased regulatory scrutiny on asset liquidation protocols, especially for offshore companies using US financial infrastructures.
Furthermore, this case could clarify whether offshore cryptocurrency businesses can be held liable in US bankruptcy cases, potentially impacting how large digital asset companies manage collateral and liquidity during financial downturns.
Tether’s Expansion Amid Ongoing Legal Issues
Despite these legal challenges, Tether continues to broaden its influence in the cryptocurrency market. Recently, the company acquired a significant stake in Twenty One Capital, closely associated with Strike CEO Jack Mallers, linking Tether to one of the largest corporate holders of Bitcoin globally.
In another notable development, Tether transferred approximately 37,230 BTC, valued at around $3.9 billion, to addresses tied to its trading activities. This suggests that the company is actively consolidating its Bitcoin reserves even while facing the legal repercussions from Celsius’s collapse.
Speculation persists around Tether’s valuation and the possibility of an initial public offering (IPO). However, CEO Paolo Ardoino has stated that the firm is not preparing for a public listing, despite speculation suggesting valuations approaching $500 billion.
As legal proceedings advance, the crypto community will be closely monitoring Tether’s actions in response to increasing judicial pressure, marking one of the most significant financial disputes in the sector’s history.
