A U.S. bankruptcy judge has ruled that key allegations in Celsius Network’s $4 billion lawsuit against Tether will proceed, marking a major legal development in the ongoing fallout from the 2022 crypto crash.
The ruling, issued by the Southern District of New York on June 30, partially denied Tether’s motion to dismiss the case.
While some secondary claims were dismissed, the judge determined that Celsius’s core accusations, including breach of contract and fraudulent transfers, were legally plausible and will continue through the courts.
The decision is seen as a significant setback for Tether, which had sought to dismiss the lawsuit in its entirety.
Celsius Alleges Tether Engaged in a $4 Billion “Fire Sale” of Collateralized Bitcoin
At the heart of the lawsuit is Celsius Network’s claim that Tether improperly liquidated over 39,500 Bitcoin (BTC) in June 2022 during a period of extreme market volatility.
According to Celsius, the liquidation was executed hastily, at an average price of $20,656 per BTC, significantly below market value at the time.
Celsius argues that this fire sale breached the terms of their loan agreement, which allegedly included a 10-hour waiting period for margin calls, giving Celsius the opportunity to post more collateral.
By skipping this window, Celsius claims Tether acted in bad faith and inflicted severe financial damage, resulting in a $4 billion loss when measured against current Bitcoin prices.
Also Read: Celsius Founder Alex Mashinsky Sentenced To 12 Years For Defrauding Crypto Customers
Tether’s Jurisdictional Defense Rejected by U.S. Bankruptcy Judge
Tether had attempted to avoid the lawsuit by arguing it was not subject to U.S. jurisdiction, citing its operations in the British Virgin Islands and Hong Kong.
The company maintained that applying U.S. bankruptcy law to their international business dealings was an impermissible extraterritorial reach.
However, the court disagreed, siding with Celsius’s assertion that the alleged misconduct involved substantial U.S. connections.
These include communications with U.S.-based personnel, financial accounts under U.S. jurisdiction, and operational decisions tied to the American financial system.
These links were sufficient for the court to consider the claims as “domestic,” effectively undercutting Tether’s jurisdictional defense.
Also Read: Ex-Celsius CEO Can Face 20 Years Over $7 Billion Crypto Collapse, Details Inside
Legal Battle Could Set Precedent for Future Crypto Contract Disputes
The court’s decision to allow Celsius’s core claims to move forward carries broader implications for the crypto industry.
As Celsius continues to pursue damages, this case may serve as a precedent for how digital asset collateral and cross-border financial agreements are interpreted under U.S. bankruptcy and contract law.
It also highlights the vulnerabilities in opaque lending arrangements that were common during the 2021–2022 bull run.
If Celsius prevails, it could reshape expectations around collateral liquidation rights and reinforce the legal accountability of offshore crypto firms when operating within U.S. markets.
The case now enters a critical phase, with both parties preparing for further discovery and potential trial.