US Bankruptcy court allows Celsius to progress with lawsuit against Tether over $4 billion in Bitcoin

A US bankruptcy court has allowed the Celsius Network to proceed with its case against Tether, the issuer of USDT Stablecoin. The lawsuit dates back to the 2022 crypto market crash, which led to Celsius’ bankruptcy.

In its lawsuit, Celsius accused Tether of wrongfully selling up to 39,500 Bitcoin worth over $4 billion, which it held as collateral for Celsius. The firm reportedly sold the BTC after the price crash. However, the crypto lender claimed that the sale.

The bankrupt firm said that the sale violates its agreement with Tether, which required the stablecoin issuer to give 10 hours’ notice before it sells any collateral. Celsius has claimed significant losses and will likely seek damages.

Tether had tried to halt the lawsuit by requesting the court to dismiss it, noting in its submission that the sale followed due process and that the US court lacked jurisdiction over the matter as the transactions were international. However, the trial judge, Martin Glenn, disagreed and dismissed this submission.

In his decision, the judge said there were many compelling reasons for the court to entertain the case, especially when the people, system, and accounts used in the transaction by Tether are domiciled in the US.

The court added that  Celsius can move on with the vital parts of its lawsuit, which include fraudulent transfer, preferential transfer, and breach of contract. However, it dismissed other claims by Celsius, citing jurisdiction and insufficient evidence.

Still, the decision to preserve the breach of contract claim means that Celsius could be entitled to damages if the court finds Tether liable.

Tether USDT supply reaches $158 billion

Meanwhile, Tether USDT supply does not seem affected by the development, as it reached an all-time high of over $158 billion after a 3% gain in the past month. The surge in market cap shows how the stablecoin continues to grow and dominate the sector, even as Circle USDC appears to be the more regulatory-compliant option.

Beyond that, Tether has also been busy with other investments, including recent efforts to have a bigger say in decision-making at Juventus Football Club, which has over 10% stake. With $13 billion in profits for 2024, the company appears to have a solid financial footing.

However, critics continue to question the company’s status and whether it has sufficient reserves to back the over $158 billion in USDT it has issued. The recent ruling has now added to the concerns around the company.

What is next for Tether?

Although the full trial has not happened, the ruling is a setback for Tether. The firm tried to get the court to dismiss the case and described it as “shakedown litigation,” noting that Celsius is to blame for its failure.

However, the court decision suggests that Celsius might have a case. Still, it is too early to determine what will happen, and even Judge Glen acknowledged this. He noted that several factors, such as the time of the sale and whether it was over 10 hours, will determine whether the sale was legal.

Meanwhile, Tether is already facing some regulatory challenges in the US. With the Senate passing the GENIUS Act and the proposed regulation expected to become law, many believe the Tether business could be affected.

Experts believe that the proposed law will affect how stablecoin issuers operate and could make it difficult for offshore companies like Tether to continue operating in the US. However, the company had already said it might issue a new stablecoin for the US market.

Tether CEO Paolo Ardoino said this earlier this year and has promoted the GENIUS Act as welcome legislation. This differs from how the company has approached the European Union’s Market in Crypto Assets (MiCA) regulations.

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