Celsius Wins Key Ruling in $4B Lawsuit Against Tether Over Bitcoin Liquidation

A New York bankruptcy court has allowed Celsius to proceed with most of its $4 billion lawsuit against stablecoin issuer Tether, according to a court filing dated June 30. The lawsuit centers on Tether’s alleged improper liquidation of nearly 40,000 BTC—worth over $4.3 billion at today’s prices—that Celsius had posted as loan collateral in June 2022, shortly before the crypto lender froze customer withdrawals.

Celsius alleges that Tether violated contractual obligations by not giving the firm the contractually required 10-hour window to post more collateral. According to Celsius’ lawyers, the firm still held sufficient Bitcoin on its balance sheet at the time and could have avoided the sale, which occurred near market lows. They argue that Tether's actions prioritized its own recovery at the expense of Celsius’ broader creditor base.

Tether, which previously dismissed the lawsuit as “baseless” and a “shameless litigation money grab,” has claimed the liquidation was directed by Celsius executives to settle an $815 million USDT debt. However, Chief Bankruptcy Judge Martin Glenn ruled that any “oral permission” allegedly given by former Celsius CEO Alex Mashinsky—who was sentenced to 12 years for fraud in May—was insufficient to override the written agreement between the parties.

While the judge dismissed one claim relating to the “covenant of good faith and fair dealing” under British Virgin Islands law, he did so without prejudice, allowing Celsius to amend and refile that portion.

The decision marks a significant legal win for Celsius as it seeks to recover assets for creditors amid its ongoing bankruptcy proceedings and adds new pressure to Tether’s legal defense strategy.