A US Bankruptcy Court has ruled that Celsius Network may proceed with several claims in its lawsuit against stablecoin issuer Tether, according to a June 30 order from Judge Martin Glenn.
According to the filing, the court allowed Celsius to pursue allegations that Tether violated US bankruptcy laws by receiving preferential transfers and unjustly liquidating tens of thousands of Bitcoin during the weeks leading up to Celsius’s collapse in 2022.
The ruling also permits Celsius to pursue breach of contract claims over the early liquidation of collateral, despite a 10-hour waiting period outlined in the firm’s amended loan agreement.
Specifically, the court:
- Declined to dismiss Counts I and II on the avoidance of preferential transfers.
- Declined to dismiss Counts V and VI regarding fraudulent transfer claims.
- Allowed the breach of contract claim (Count III) to proceed, stating a determination could not be made.
- Dismissed Count IV around a breach of the covenant of good faith and fair dealing without prejudice, allowing Celsius to amend it.
The disputed 57,000 BTC between Tether and Celsius
At the center of the case is more than 57,000 BTC, which Celsius claims were either improperly seized, liquidated prematurely, or transferred in excess of agreed terms. The firm argued that if these assets had been retained, their current value would exceed $4 billion.
Considering this, the court filing divided the Bitcoin transactions Celsius is seeking to recover into three categories, including:
- Collateral Return Shortfall: Celsius originally posted 16,737.27 BTC as extra collateral to cover falling crypto prices in mid-2022. Tether returned only 1,079.06 BTC, leaving 15,658.21 BTC in dispute. Celsius argues these were preferential payments made to Tether to cover existing debt and are therefore recoverable under bankruptcy law.
- Cross-Collateral Transfers: Celsius posted 10,700 BTC to secure new USDT loans in a separate deal. The firm now claims 2,228.01 BTC were excessive and should be returned.
- Unauthorized Liquidation: The most significant portion of assets involves Tether’s sale of 39,542.42 BTC on June 13, 2022, allegedly executed without honoring a contractual 10-hour notice period. Celsius alleges Tether sold the BTC to itself at a discount, causing over $100 million in immediate losses.
Celsius claimed these transactions unfairly improved Tether’s position as a creditor, allowing it to recover nearly the full value of its $812 million loan while other creditors were left behind.
Other parts of the case
While the judge allowed core claims to proceed, the court dismissed other portions of the complaint. These include claims against specific Tether entities due to a lack of personal jurisdiction and allegations that depend on applying US bankruptcy law outside the country.
The court also ruled that Celsius failed to prove Tether breached duties under British Virgin Islands law, particularly regarding good faith and fair dealing.
Nonetheless, this ruling gives Celsius a green light to pursue what could become one of the crypto industry’s most consequential asset recovery cases.
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