A U.S. bankruptcy judge has allowed Celsius Network to move forward with a lawsuit accusing Tether of wrongfully liquidating a significant amount of Bitcoin during the crypto lender's collapse in 2022.
Background of the Lawsuit
Celsius claims that Tether breached their lending agreement by liquidating over 39,500 BTC worth approximately $812 million without adhering to a mandatory 10-hour waiting period. The Bitcoin was allegedly sold at an average price of $20,656, below market levels, and Celsius contends that the rushed sale cost the company over $4 billion at current prices.
Tether's Response to Allegations
Tether disputes these claims, asserting that the Bitcoin was liquidated at Celsius' direction and with the company's consent at June 2022 prices. The complaint also alleges that Tether violated good faith provisions under British Virgin Islands law and made fraudulent and preferential transfers that can be contested under U.S. bankruptcy rules.
Context of the Case and Next Steps
The judge dismissed parts of Tether's attempts to dismiss the case, siding with Celsius that the conduct and transfers in question were sufficiently domestic to keep the case within U.S. jurisdiction. While some secondary claims were dismissed, the core breach-of-contract and fraudulent transfer allegations will proceed. This case stems from the chaotic unwinding of Celsius in mid-2022, when the lender froze customer accounts and filed for bankruptcy with a multibillion-dollar deficit. Celsius exited Chapter 11 proceedings in January and has begun repaying creditors.
Celsius's lawsuit against Tether highlights the significance of adhering to contractual obligations in the cryptocurrency industry and poses potential legal repercussions for dishonest practices. The case continues to develop, and its outcome may impact various stakeholders within the cryptocurrency space.
