The legal battle between Celsius Network and Tether is heating up. A bankruptcy judge has allowed Celsius's lawsuit against Tether regarding Bitcoin liquidation to move forward, potentially impacting the crypto lending landscape.
Overview of Celsius's Lawsuit Against Tether
Celsius alleges that Tether executed a 'fire sale' of 39,500 Bitcoins at an average price of $20,656 each during the company's collapse in June 2022. Celsius claims this violated their lending agreement and constituted fraudulent transfers under US law. Court documents indicate Tether applied the proceeds to offset Celsius's $812 million debt without adhering to agreed-upon procedures.
Impact on Crypto Lending Market
The court's ruling affects how collateral liquidation occurs during market stress periods. Celsius asserts the hasty Bitcoin sale has cost the company over $4 billion at current prices. Current data shows that institutional crypto lending markets recorded $3.4 billion in counterparty defaults in 2024, highlighting the importance of proper collateral management.
Implications for Offshore Crypto Companies
This ruling sets a precedent for US courts' jurisdiction over foreign cryptocurrency firms. Tether argued that the case represented an improper application of US bankruptcy law to British Virgin Islands entities, but the judge dismissed this defense after finding domestic operational connections through US personnel and banking relationships.
The Celsius lawsuit against Tether is not just a legal dispute; it reflects growing risks in crypto lending and collateral management. With increasing institutional participation in crypto finance and the need for clear liquidation protocols, cases like this may become a cornerstone for future regulatory oversight in the sector.
