In a significant development, Celsius Network has been granted permission to sue Tether over a controversial sale of Bitcoin valued at $4 billion. This lawsuit, stemming from a liquidation incident in mid-2022, could reshape the legal treatment of cryptocurrency businesses in U.S. courts.
Celsius Sues Tether Over Alleged Contract Breach
The dispute traces back to June 2022, during a turbulent period in the cryptocurrency market. Legal documents indicate that Tether had extended loans to Celsius, secured by Bitcoin collateral. Celsius alleges that Tether prematurely sold 39,500 BTC at an average price of $20,656, failing to meet the contractually required 10-hour notice period.
According to Celsius, these assets were liquidated amid extreme market volatility and sold significantly below their market value, resulting in a loss exceeding $4 billion based on current Bitcoin prices. Additionally, Celsius claims that Tether transferred the liquidated BTC to Bitfinex, a platform operated by Tether’s sister company, raising red flags about related-party transactions and asset custody.
U.S. Court Dismisses Tether’s Jurisdiction Challenge
Tether’s defense argued that the U.S. courts lacked jurisdiction due to the company’s operations based in the British Virgin Islands and Hong Kong. However, the judge disagreed, noting that Tether utilized U.S.-based personnel, bank accounts, and communication systems in its dealings with Celsius. Consequently, the court deemed Tether’s actions sufficiently “domestic” to warrant legal scrutiny under U.S. law.
This ruling allows Celsius to pursue key legal claims, including breach of contract and fraudulent transfer, which directly impact the practices of digital asset lenders and stablecoin issuers.
Wider Implications for Cryptocurrency Lending and Stablecoin Governance
Legal experts suggest that the outcome of this case could influence regulatory approaches toward stablecoin issuers in the U.S. Should Celsius successfully demonstrate that Tether mishandled client assets or ignored notice periods during market turmoil, it may prompt calls for stricter oversight of asset liquidation processes, especially for offshore companies operating through U.S. financial infrastructures.
This case could serve as a precedent for future litigation related to cross-border lending and clarify whether offshore cryptocurrency firms can be held accountable in U.S. bankruptcy proceedings. Consequently, the outcome may reshape the risk management practices of other major digital asset companies during market downturns.
Tether Expands Market Presence Amid Legal Scrutiny
Despite ongoing legal challenges, Tether continues to grow its presence in the cryptocurrency sector, recently acquiring a majority stake in Twenty One Capital, linked to Strike CEO Jack Mallers, thereby connecting Tether to the world’s third-largest Bitcoin holder.
In another key development, Tether transferred approximately 37,230 BTC, valued around $3.9 billion, to addresses associated with its trading operations. This move appears to consolidate Tether’s Bitcoin reserves as it navigates the legal fallout from the Celsius collapse.
Amidst speculation regarding its valuation and potential IPO, Tether’s CEO Paolo Ardoino has denied any plans for going public, refuting rumors of valuations nearing $500 billion. As the Celsius lawsuit progresses, Tether’s responses to escalating legal pressure will be closely monitored in what is becoming one of the largest financial disputes in the cryptocurrency sector.
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