A U.S. bankruptcy judge has ruled that Celsius Network’s $4 billion lawsuit against Tether can proceed, marking a major development in one of crypto’s most high-profile legal disputes. Celsius alleges that Tether improperly sold off more than 39,500 Bitcoin during a liquidity crisis in June 2022, violating their agreement and U.S. bankruptcy laws.

According to court documents filed in New York, Celsius says Tether executed a rushed sale—dubbed a “fire sale”—of Bitcoin collateral without honoring a 10-hour grace period, liquidating the BTC at an average of $20,656, which Celsius claims was below market value. The crypto lender says this resulted in losses exceeding $4 billion at today’s prices and accuses Tether of transferring the proceeds to its own Bitfinex accounts.

The lawsuit argues that Tether breached its contract, violated good faith under British Virgin Islands law, and made fraudulent and preferential transfers that are subject to reversal under U.S. law. Though Tether is based offshore, the court agreed that the actions had enough domestic ties to fall under U.S. jurisdiction.

Tether tried to dismiss the case entirely in August 2024, arguing lack of jurisdiction and legal merit. While the judge threw out some claims, Celsius's core allegations—including breach of contract and fraudulent transfers—will proceed.

Celsius, once a major crypto lender, emerged from bankruptcy in January 2024. Meanwhile, Tether continues to grow its influence, recently acquiring a majority stake in Twenty One Capital and transferring $3.9 billion in Bitcoin to its addresses. Despite rumors, Tether CEO Paolo Ardoino dismissed any plans for an IPO, though he hinted the company’s valuation could exceed $500 billion.