Tether’s not getting off easy this time. A US bankruptcy judge has ruled that Celsius Network’s multibillion-dollar lawsuit against Tether can proceed, denying part of Tether’s attempt to dismiss the claims. The crypto lender has been claiming that Tether "improperly" liquidated its Bitcoin collateral during the collapse of Celsius in 2022. I think this lawsuit could shake up the crypto world even more than the last meme coin craze.
According to court documents filed on Monday, Celsius alleges that Tether executed a "fire sale" of over 39,500 Bitcoin in June 2022, basically selling off a massive chunk of Bitcoin in a hurry and applying the proceeds to pay down Celsius’s $812 million debt. Now, Celsius claims that Tether didn't follow the agreed-upon procedures, which, in my opinion, sounds like a classic case of “you should’ve read the fine print.” Celsius is arguing that Tether’s actions violated their lending agreement and the good faith principles under British Virgin Islands law. Oh, and let’s not forget the claim that this was a fraudulent and preferential transfer, making the sale potentially avoidable under the US Bankruptcy Code.
The drama centers on a margin call Tether issued when Bitcoin prices took a dive. Celsius says Tether liquidated its Bitcoin before the 10-hour waiting period, selling it at an average price of $20,656, well below market levels at the time. I don’t know about you, but that price tag screams “fire sale” more than it screams "market strategy." To top it all off, Celsius claims Tether transferred the assets to its own Bitfinex accounts. Sounds a little shady, right?
$4 Billion Lost and Tether’s Struggle to Dismiss the Case
As if this wasn’t enough, Celsius claims it lost a whopping $4 billion in the liquidation process. That’s not pocket change, folks. Tether’s lawyers tried to throw this case out of court, arguing that the US court didn’t have jurisdiction and that Celsius’s allegations were, well, a bit flimsy. But the judge wasn’t having it. The court ruled that Celsius made a solid case for "domestic" misconduct, rejecting Tether’s argument that the case couldn’t be tried in US courts. Ouch. Looks like Tether’s argument didn’t hold water this time.
In August 2024, Tether tried again to dismiss the lawsuit, but this time, the judge allowed Celsius’s breach of contract, fraudulent transfer, and preference claims to proceed. It's like Tether is the villain in a legal drama, and things aren't looking great for them at the moment.
As a side note, while Celsius is wrapping up its bankruptcy after an 18-month restructuring process, the company is now focusing on paying back its creditors. Meanwhile, Tether continues to do its thing, expanding its Bitcoin holdings and making big moves in the crypto world.
In a separate bit of news, Tether CEO Paolo Ardoino recently shot down rumors of a Tether IPO. While some observers were suggesting Tether could be valued at over $500 billion (bigger than Costco or Coca-Cola, mind you), Ardoino dismissed the idea, calling it a "beautiful number" but not something Tether was interested in. If you’ve got enough Bitcoin and gold reserves to back your stablecoin, who needs the hassle of an IPO anyway?
So, as Celsius fights on in court, Tether may want to keep an eye on this case. The outcome could affect not just the two companies involved but the whole crypto space. Stay tuned, this courtroom drama is far from over!
Matvii Diadkov
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