- Celsius is suing Tether for early Bitcoin liquidations.
- The event unravelled as Terra imploded the crypto market.
- The ruling could have sweeping effects on the crypto industry.
A judge’s decision to let Celsius proceed with its $4 billion lawsuit against Tether paves the way for US entities to pursue foreign crypto firms, according to a legal expert.
The ruling “marks a pivotal moment that could potentially reshape the legal landscape for cross-border cryptocurrency disputes,” Peter Vas, partner at law firm Spencer West, said in emailed comments.
It “reinforces that US courts may assert jurisdiction if the alleged misconduct involves US-based communications, personnel or financial accounts.”
In short, New York Judge Martin Glenn’s ruling isn’t necessarily about who owes what, but the signal it sends to companies residing outside of the US.
It’s a warning shot to those firms that they aren’t out of reach of American courts just because they’re incorporated in other jurisdictions.
It also arrives as Washington inches closer to passing landmark stablecoin legislation in the US. With the $263 billion sector under growing scrutiny, the case could shape how US courts interpret oversight and accountability, particularly for firms like Tether that operate across borders but touch US systems.
Celsius went bankrupt in 2022 after a series of crypto scandals led jittery users to withdraw their crypto in massive amounts.
The company was unable to honour those withdrawals and declared bankruptcy in June 2022.
In May this year, Celsius CEO Alex Mashinky received a 12-year prison sentence.
“Although the Court determined that it could not dismiss the case in its entirety prior to discovery, Celsius’ claims on the merits remain as baseless today as they were when first filed,” a Tether representative told DL News. “We look forward to proving that in court.”
Representatives for Celsius didn’t respond to requests for comment.
Allegations
The case stems from the 2022 crypto crash, when Celsius pledged 39,500 Bitcoin as collateral for a USDT loan from Tether.
The loan, worth approximately $820 million at the time, came with a 10-hour grace period in the event of a margin call.
But when Bitcoin prices plunged amid a systemic collapse brought on by the implosion of the stablecoin project Terra, Tether allegedly liquidated Celsius’ collateral after just nine hours and sold Bitcoin at a low of about $20,000.
Rethinking liquidations
Celsius alleged the early liquidation breached the loan agreement and gave Tether unfair repayment priority over other creditors.
Importantly, if the lawsuit is successful, it could compel stablecoin issuers and lenders to tighten their contracts and reconsider how liquidations are triggered under market stress.
For offshore firms hoping to stay out of US courtrooms, the message is clear: location alone may no longer shield you from American judges.
Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him at psolimano@dlnews.com.