Bankruptcy judge allows Celsius to proceed with claims against Tether in $4.3B dispute

A New York bankruptcy judge has allowed Celsius to move forward with most of its $4.3 billion lawsuit against stablecoin issuer Tether, permitting Celsius to pursue claims that Tether allegedly improperly liquidated its bitcoin collateral.

Celsius filed a lawsuit against Tether in August 2024, alleging that Tether improperly conducted a fire sale of Celsius's collateral — 39,542 BTC worth roughly $4.3 billion at today's market prices — before the expiration of a required 10-hour waiting period, according to a court document filed Monday. 

Celsius had secured loans from Tether using cryptocurrencies, including bitcoin, as collateral. In 2022, Tether made multiple requests for Celsius to provide additional collateral to support its loans.

Chief Bankruptcy Judge Martin Glenn, who oversees the case, wrote that Celsius' then-CEO Alexander Mashinsky's alleged oral permission to liquidate its collateral was "insufficient." The judge noted that failing to honor the 10-hour window, as outlined in the firms’ agreement, could still constitute a breach of contract.

Tether denied any wrongdoing last year when Celsius filed the lawsuit. "This baseless lawsuit against Tether proves the adage that 'no good deed goes unpunished,'" Tether said at the time. "Rather than recognize the clear validity of the agreement entered into years before Celsius' bankruptcy, this lawsuit seeks to improperly impose the costs of Celsius' mismanagement and failure on Tether."

Celsius filed for bankruptcy in 2022 following the discovery of a $1.2 billion gap in its balance sheet. It emerged from bankruptcy in November 2023, following the court's approval of its reorganization plan.