A U.S. bankruptcy judge has ruled that Celsius Network can proceed with its $4.3 billion lawsuit against Tether.

The case focuses on claims that the USDT issuer improperly sold nearly 40,000 Bitcoin (BTC) in June 2022.

The Judge’s Ruling

In court documents filed in New York on Monday, Judge Martin Glenn ruled that some aspects of the multibillion-dollar lawsuit had merit.

Celsius had accused the stablecoin company of carrying out a “fire sale” of more than 39,500 BTC and applying the proceeds to a debt of $812 million. The now-defunct crypto lender claimed this was done without following agreed-upon procedures, resulting in losses exceeding $4 billion based on current prices.

Judge Glenn argued that the alleged verbal permission from former Celsius CEO Alex Mashinsky to liquidate the collateral was “insufficient.” He added that failing to observe a 10-hour grace period for posting collateral could still count as a breach, “oral permission or not.”

The judge also said that the digital asset firm’s awareness of Celsius’s insolvency at the time did not give it a legal basis to act independently. However, he dismissed some parts of the lawsuit. For instance, claims against certain Tether entities were dropped due to a lack of personal jurisdiction. Allegations that rely on applying U.S. bankruptcy law outside the country were also dismissed.

The judge further decided that Celsius did not prove the defendant had breached its duties under British Virgin Islands (BVI) law regarding good faith and fair dealing.

Details of The Case

The dispute is centred on a margin call the USDT provider issued during a decline in BTC’s prices three years ago. Celsius says the agreement included a 10-hour window to post additional collateral, but Tether sold the Bitcoin before that period expired.

The crypto lender says the respondent’s actions breached their agreement, violated “good faith and fair dealing” under BVI law, and involved fraudulent and preferential transfers that violate the U.S. Bankruptcy Code.

According to the filing, the assets were liquidated at an average price of $20,656 per coin, which was below market value. Celsius further alleged that the proceeds were later transferred to the stablecoin operators Bitfinex accounts. The transactions also involved U.S.-based staff, accounts, and communications, which it believes gives the case enough ties to be handled in a U.S. court.

In August 2024, Tether moved to dismiss the case, arguing the court lacked jurisdictional authority and that the crypto lender’s claims had no legal ground. The company called the lawsuit “baseless” and a “shameless litigation money grab.”

CEO Paolo Ardoino said in a statement that Celsius executives had told his organization to sell the BTC “in order to close out its roughly 815 million USDT position.” He added that the lawsuit was an attempt by the bankrupt firm to shift blame for its mismanagement.

Celsius completed its bankruptcy process on January 31, 2024, and is currently repaying its creditors. More recently, its former top executive, Mashinsky, was sentenced to 12 years in prison for fraud.