A New York bankruptcy court has given Celsius the go-ahead to pursue the bulk of its $4 billion lawsuit against stablecoin issuer Tether, according to a recent court filing.
The bankrupt crypto lender filed suit against Tether last year, alleging that Tether improperly liquidated nearly 40,000 bitcoins — worth over $4.3 billion at today’s prices — that it was holding as loan collateral in June 2022, shortly before Celsius halted withdrawals. In their suit, Celsius’ lawyers argued that Tether didn’t give Celsius enough time to satisfy its collateral demands, which they claimed it had “sufficient Bitcoin on its balance sheet” to do so “given that Celsius had instituted a ‘pause’ on customer withdrawals … resulting in the retention of, and access to, a significant amount of Bitcoin.”
“If Celsius had been given the opportunity to meet the collateral demand — which it had a contractual right to do — it could have been able to avoid the disposition of its Bitcoin at near the bottom of the cryptocurrency market,” Celsius’ lawyers wrote. “Instead, that disposition was carried out for the benefit of just one creditor: Tether.”
At the time the suit was filed, Tether pledged to fight it, calling the suit “baseless” and a “shameless litigation money grab” in a press statement. Tether claimed that Celsius executives directed the liquidation of its BTC collateral held by Tether in “in order to close out its roughly 815 million USDT position” with the company.
Read more: Tether to Fight Celsius’ $3.3 Billion ‘Shakedown’ Litigation
“Rather than recognize the clear validity of the agreement entered into years before Celsius’ bankruptcy, this lawsuit seeks to improperly impose the costs of Celsius’ mismanagement and failure on Tether,” the company’s statement said.
However, the judge overseeing the case disagreed with Tether, arguing in his Monday order that Celsius’ then-CEO Alex Mashinsky’s — who was sentenced to 12 years in prison for fraud in May — ”alleged oral permission” given to Tether to liquidate Celsius’ bitcoin collateral was “insufficient” and that not giving Celsius the 10-hour window to post collateral allotted by the two firms’ contract could still be a breach of contract, verbal permission or not.
In his June 30th order, Chief Bankruptcy Judge Martin Glenn of the Southern District of New York (SDNY) granted threw out only one count of the amended complaint, Count 4, which alleged that Tether breached the “covenant of good faith and fair dealing” under British Virgin Islands law. For that count, Glenn decided to dismiss it without prejudice, giving Celsius’ lawyers the opportunity to amend it with “facts sufficient to bring themselves within the requirements of BVI law.”