A New York bankruptcy court has authorized Celsius to forge ahead with the majority of its $4.3 billion lawsuit against Tether, the stablecoin issuer, according to a recent court document. The embattled crypto lender, which filed the suit last year, accuses Tether of prematurely liquidating nearly 40,000 bitcoins—valued at over $4.3 billion today—that Celsius had posted as loan collateral in June 2022. This action allegedly took place just before Celsius halted customer withdrawals, triggering a whirlwind of controversy.
The Legal Wrangle Unfolds
Celsius contends that Tether’s actions were unjustified, claiming that they had sufficient Bitcoin on their balance sheet to meet the collateral demands. According to Celsius’ legal team, the lender had already paused customer withdrawals, effectively retaining access to a large amount of Bitcoin. “If Celsius had been given the opportunity to meet the collateral demand—which it had a contractual right to do—it could have avoided the sale of its Bitcoin at a market low,” Celsius’ lawyers argued. They further asserted that the sale served only Tether’s interests.
Tether, on the other hand, has been vocally dismissive of the lawsuit, labeling it a “baseless” and “shameless litigation money grab.” The stablecoin giant suggested that Celsius executives themselves directed the liquidation of their BTC collateral to settle an 815 million USDT debt with Tether. “Rather than acknowledge the clear validity of a long-standing agreement, this lawsuit seeks to unfairly burden Tether with the consequences of Celsius’ mismanagement and failure,” Tether stated.
Judge Glenn’s Ruling
Chief Bankruptcy Judge Martin Glenn, presiding over the case, appeared to side with Celsius in his June 30 ruling. Glenn found that Celsius’ then-CEO Alex Mashinsky’s alleged verbal permission for Tether to liquidate their bitcoin collateral was “insufficient.” The judge underscored that not granting Celsius the 10-hour window to post collateral, as outlined in the contractual agreement, could indeed constitute a breach of contract.
However, the court did dismiss one aspect of the lawsuit—Count 4, which accused Tether of violating the “covenant of good faith and fair dealing” under British Virgin Islands law. Yet, this dismissal was without prejudice, offering Celsius the chance to revise this claim with additional facts.
Implications for the Crypto Landscape
This legal tussle between two crypto heavyweights has far-reaching implications for the industry. The case sheds light on the murky waters of crypto lending and borrowing, highlighting the complexities and risks involved. Legal experts and market analysts are watching closely, pondering whether this will set a precedent for future disputes. This follows a pattern of institutional adoption, which we detailed in our analysis of corporate treasury investments.
Crypto analyst Sarah Kim noted, “The court’s decision to let Celsius proceed with most of its claims against Tether could embolden other crypto firms to take legal action when they believe contracts have been breached. It’s a reminder that even in the wild west of crypto, legal contracts are king.”
The Road Ahead
As the case progresses, both parties face significant uncertainties. For Celsius, the ability to amend their dismissed claim could potentially strengthen their lawsuit. Meanwhile, Tether remains steadfast, preparing to challenge every allegation. The outcome of this case could influence not only the involved parties but also the broader crypto community, especially in how loan collateral and liquidation are managed in future agreements. For a deeper dive into the financial strategies of major crypto players, see our coverage of Tether and Blackstone’s treasury plans.
The unfolding legal drama is more than just a courtroom battle; it mirrors the tumultuous landscape of the crypto world, where the stakes are high, and the ground is ever-shifting. As the story develops, one thing is clear: the resolution of this lawsuit will be closely watched by crypto enthusiasts and skeptics alike, each interpreting its implications through their distinct lenses.
Source
This article is based on: NY Bankruptcy Judge Gives Celsius the Green Light to Pursue $4.3B Lawsuit Against Tether
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
