Celsius vs Tether lawsuit moves ahead in US court over $4 billion Bitcoin sale

• Celsius accuses Tether of breaching contractual obligations during a Bitcoin liquidation.
• Over 39,500 BTC were liquidated at an average price of around $20,656.
• Claims against Tether include breach of contract and fraudulent transfer actions.

Celsius Network has recently made significant progress in its legal battle against Tether regarding a Bitcoin liquidation valued at $4 billion, with a U.S. bankruptcy judge allowing the case to move forward despite Tether’s attempts to claim jurisdictional immunity.

This lawsuit stems from allegations that Tether unfairly liquidated nearly 40,000 BTC during Celsius’s financial struggles in mid-2022, allegedly violating both a contractual agreement and various U.S. bankruptcy regulations.

The court’s decision not only dismissed several minor claims but also upheld crucial allegations, including breach of contract and fraudulent transfer. This enables Celsius to advance its case and could have far-reaching implications for global crypto entities navigating U.S. legal systems, especially concerning the management, sale, or transfer of digital assets.

Celsius Accuses Tether of Premature Bitcoin Liquidation

The dispute traces back to June 2022 when Celsius was already facing considerable turmoil due to a larger downturn in the cryptocurrency market. Court documents show that Tether had extended loans to Celsius, receiving Bitcoin as collateral.

According to Celsius, Tether liquidated 39,500 BTC at an average price of $20,656 without providing the required 10-hour notice stipulated in their agreement. Celsius claims that this liquidation took place amid severe market volatility and resulted in the assets being sold far below their actual value, leading to a potential loss exceeding $4 billion based on current Bitcoin valuations.

The allegations extend further, as Celsius contends that Tether transferred the liquidated BTC to Bitfinex, which is operated by Tether’s sister company, raising serious questions regarding related-party transactions and the custody of assets.

U.S. Court Addresses Tether’s Jurisdictional Arguments

Tether’s defense centered around claims that the case should be dismissed because its operations are based in the British Virgin Islands and Hong Kong, asserting that U.S. courts lacked jurisdiction over its business dealings. However, the judge ruled that Tether’s interactions with Celsius involved sufficient U.S. operations, including the use of American staff members and banking systems, making it eligible for U.S. legal oversight.

This ruling opens avenues for Celsius to pursue various serious legal charges, such as breach of contract, fraudulent transfer, and preferential treatment of certain creditors—significant issues that touch on the governance of digital lending and stablecoin operations.

Wider Implications for Crypto Lending and Stablecoin Regulation

Legal experts suggest that the outcome of this case may significantly influence how stablecoin issuers and crypto lending platforms are regulated in the United States. Should Celsius successfully prove Tether mismanaged client assets or neglected to honor notification protocols during periods of market stress, it may catalyze demands for stricter regulations guiding asset liquidation practices, especially concerning offshore entities leveraging U.S. financial resources.

This case could also set a valuable precedent for future disputes involving cross-border lending and clarify the accountability of international crypto firms amidst U.S. bankruptcy proceedings, impacting how such entities handle collateral and liquidity risk during market downturns.

Tether Continues Market Expansion Amid Legal Challenges

In spite of ongoing legal challenges, Tether has noticeably expanded its presence within the cryptocurrency industry. Recently, the company acquired a majority stake in Twenty One Capital, an entity linked to prominent crypto figure Jack Mallers, which connects them to one of the largest corporate Bitcoin holders globally.

Additionally, Tether has moved approximately 37,230 BTC, valued at around $3.9 billion, to trading addresses associated with its operations, indicating a strategy to consolidate its Bitcoin reserves even as it faces legal scrutiny following the Celsius collapse.

Speculation continues around Tether’s market valuation and rumors of a potential initial public offering have surfaced; however, CEO Paolo Ardoino has publicly refuted any immediate plans for an IPO, clarifying that the firm is not preparing for a public listing despite valuations rumored to approach $500 billion.

As the Celsius legal case proceeds, the spotlight remains on Tether and its response to ongoing legal pressures, marking a crucial moment in one of the most expansive financial disputes in the evolving crypto landscape.