Celsius vs. Tether: $4 Billion Bitcoin Lawsuit Moves Forward

Introduction

Celsius Network, a bankrupt cryptocurrency lender, has been granted permission by a U.S. bankruptcy court to pursue a $4 billion lawsuit against Tether, the issuer of the USDT stablecoin. The dispute centers on Tether’s liquidation of approximately 39,500 Bitcoin in June 2022, which Celsius alleges was executed improperly during its collapse. This high-stakes legal battle could have significant implications for the crypto industry, raising questions about contractual obligations and bankruptcy law. This article explores the lawsuit’s origins, key allegations, and its potential impact on the market.

Origins of the Dispute: A Controversial Liquidation

In June 2022, as Celsius faced financial turmoil, Tether liquidated 39,542 Bitcoin held as collateral for an $812 million loan, selling at an average price of $20,656, which Celsius claims was below market value. Celsius alleges Tether violated their lending agreement by bypassing a 10-hour waiting period, during which Celsius could have posted additional collateral to avoid liquidation. The lawsuit, filed in 2024, also claims an additional 15,600 Bitcoin were never returned, bringing the total disputed value to over $4 billion at current prices.

Celsius’ Allegations: Breach of Contract and Fraud

Celsius argues that Tether’s actions constituted a breach of contract under British Virgin Islands law, violated good faith principles, and involved fraudulent and preferential transfers under U.S. bankruptcy law. The company contends that Tether’s premature sale during a market crash exacerbated its financial distress, costing creditors significantly. Celsius further alleges that Tether transferred the Bitcoin to its Bitfinex accounts, raising concerns about self-dealing. A New York bankruptcy judge rejected Tether’s jurisdictional challenge, citing its use of U.S.-based assets, allowing the case to proceed.

Tether’s Defense: A Question of Consent

Tether counters that the liquidation was conducted with Celsius’ consent, pointing to alleged verbal permission from then-CEO Alex Mashinsky, who was convicted of fraud in 2025. Tether claims the sale was necessary to cover Celsius’ unpaid debt and disputes the $4 billion valuation, estimating the Bitcoin’s value at $2.4 billion at the time of the lawsuit. The company has called the lawsuit a “shake down,” arguing that Celsius is deflecting blame for its mismanagement. However, the judge ruled that Mashinsky’s alleged permission was insufficient to justify bypassing the contract’s terms.

Broader Implications for the Crypto Industry

This lawsuit could set precedents for how crypto contracts and collateral disputes are handled in bankruptcy proceedings. A Celsius victory might encourage stricter adherence to lending agreements, while a Tether win could embolden stablecoin issuers in similar disputes. The case also highlights ongoing tensions in the crypto market, with Tether’s growing Bitcoin holdings—recently bolstered by its stake in Twenty One Capital—drawing scrutiny. As the industry navigates increasing regulation, the outcome could influence trust and transparency in digital asset markets.

Conclusion: A High-Stakes Battle for Crypto Accountability

The Celsius-Tether lawsuit, now valued at over $4 billion, underscores the complexities of crypto lending and the risks of rapid liquidations during market downturns. With Celsius seeking to recover losses for its creditors and Tether defending its actions, the case could reshape legal standards in the crypto space. As the court delves into allegations of breach of contract and fraudulent transfers, the industry watches closely, aware that the outcome may redefine accountability and trust in cryptocurrency transactions.