According to court documents filed Monday in New York, the judge denied Tether’s effort to dismiss allegations that it improperly liquidated Celsius’s Bitcoin collateral during the lender’s collapse.
In the lawsuit, Celsius alleged that Tether sold over 39,500 Bitcoin in June 2022, using the proceeds to cover Celsius’s $812 million debt without following agreed-upon procedures.
Celsius claimed that Tether sold its collateral before a required 10-hour waiting period, offloading the BTC at an average price of $20,656, before transferring the assets to its own Bitfinex accounts.
Celsius argued that Tether’s actions breached their lending agreement, violated principles of good faith under British Virgin Islands law, and amounted to fraudulent and preferential transfers avoidable under US bankruptcy rules.
The lender also argued Tether’s actions involved US-based communications, personnel, and bank accounts, giving American courts jurisdiction despite Tether being incorporated offshore. The judge sided with Celsius, finding the alleged misconduct sufficiently “domestic” in nature to keep key claims alive, including breach of contract, fraudulent transfer, and preference allegations.
Celsius said the rushed liquidation deprived it of BTC now worth more than $4 billion.
Federal prosecutors urged the court to impose a two-decade sentence, citing Mashinsky’s central role in a scheme that left customers unable to access nearly $4.7 billion in cryptocurrency when Celsius froze withdrawals in June 2022.
In April, the US Department of Justice (DOJ) sought a 20-year prison sentence for Alex Mashinsky, the former CEO of bankrupt crypto lending platform Celsius, for orchestrating a “years-long campaign of lies and self-dealing” that defrauded thousands of investors.
Celsius filed for bankruptcy in July 2022, leaving around $4.7 billion in user assets locked on the platform.
Celsius creditors, who have already received over $2.5 billion in distributions, will benefit as reserved cash, crypto, and MiningCo shares are released. The decision follows a May 2025 agreement between Mashinsky and the Celsius litigation team.
The ruling, entered June 16, 2025, disallows claims from Mashinsky and his entities, freeing up funds for creditor payouts under Celsius’s Chapter 11 plan.