A US bankruptcy court ruled that Celsius’ lawsuit against Tether can continue. Celsius alleged that the USDT stablecoin issuer violated their contract to liquidate Bitcoin worth $4 billion as it became insolvent.
Some Celsius creditors hope that the discovery process will uncover why Tether disposed of these assets so quickly. However, it’s unclear how the firm would use the money if it wins, as it has already repaid most of its creditors.
Tether Faces a $4 Billion Lawsuit
Celsius’ bankruptcy in 2022 was one of the greatest collapses in crypto history, sending shockwaves through the DeFi ecosystem.
Last year, CEO Alex Mashinsky pleaded guilty to fraud charges and faces 20 years in prison, while Celsius sued Tether over some disputed Bitcoin transfers. Today, Judge Martin Glenn ruled that this suit can proceed.
Essentially, Celsius claims that Tether breached the firm’s prior agreements to liquidate 39,500 BTC, which is currently worth around $4 billion.
The USDT stablecoin issuer held these assets as loan collateral and disposed of them to recover an $812 million debt as Celsius collapsed. Nonetheless, Celsius insists that this move was illegal, as it violated a 10-hour waiting period specified in the contract.
So, why does this matter? Celsius has already paid off 93% of its creditors, and its founder/CEO is currently in prison. It’s not clear how Celsius could utilize this $4 billion, and Tether CEO Paolo Ardoino denounced the suit as a shakedown.
Nonetheless, Celsius creditors like Otis Davis have reacted warmly to the announcement. Specifically, he believes that a formal legal battle may uncover why exactly Tether disregarded the waiting period, possibly revealing evidence of past fraud.
“The lawyers handling this case should go deep into discovery to uncover…fraud. I wouldn’t settle, because I know that I would discover criminal behavior during the discovery phase of the case,” he claimed.
However, the case may not actually delve into this topic. Celsius also tried to argue that Tether’s overseas subsidiaries guarantee that British Virgin Islands’ law is relevant to the case, but Judge Glenn rejected this claim.
Celsius and its creditors overwhelmingly consider that Tether overreached by liquidating this BTC so quickly. Yet, some community members believe it may have been a simple error. After all, Celsius was insolvent at the time.
Whatever happens in the next round of the lawsuit, $4 billion is at stake. That sum alone seems sufficient to draw the crypto community’s attention. Whether or not Celsius and Tether settle out of court, this battle could have long-term consequences.
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