The legal battle commenced in August 2024 when Celsius accused Tether of unlawfully initiating a fire sale of Celsius’s collateral, which consisted of 39,542 BTC valued at approximately $4.3 billion at current market rates. This was reportedly done before the stipulated 10-hour waiting period had lapsed, as per a court document filed on Monday.

Previously, Celsius had secured loans from Tether, using cryptocurrencies, including bitcoin, as collateral. During 2022, Tether had repeatedly asked Celsius to supply additional collateral to back its loans.

Chief Bankruptcy Judge Martin Glenn, who is handling the case, stated that the alleged oral consent given by former Celsius CEO Alexander Mashinsky to liquidate the collateral was “insufficient.” The judge highlighted that the failure to adhere to the 10-hour waiting period, as stated in the agreement between the companies, might still be considered a contract breach.

Upon being sued by Celsius last year, Tether denied any malpractice. Tether, in its defense, stated, “This groundless lawsuit against Tether is a classic example of ‘no good deed goes unpunished.’ Instead of acknowledging the legitimate agreement signed years before Celsius’s bankruptcy, this lawsuit attempts to wrongfully shift the burden of Celsius’s mismanagement and failure onto Tether.”

However, Monday’s court verdict dismissed one count (Count 4) in Tether’s favor, without prejudice. This specific count alleged that Tether violated its responsibility of “good faith and fair dealing” under the British Virgin Islands law. The dismissal by Judge Glenn came without prejudice, implying that Celsius’s lawyers can revise and resubmit the allegation, provided they offer sufficient factual evidence.

Celsius filed for bankruptcy in 2022 following the identification of a $1.2 billion discrepancy in its balance sheet. The company emerged from bankruptcy in November 2023 after the court approved its reorganization plan.

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According to the Arkham Intelligence dashboard, the lender holds 410,378 staked ETH worth $862.45 million, and the pending withdrawals of staked assets by other centralized crypto exchanges account for around 85% of entities waiting to withdraw. Per Nansen data, Kraken accounts for most of the pending withdrawals with 556,321 ETH, followed by Binance with 216,208 ETH and Coinbase with 117,239.

The recent regulatory actions in the United States could be forcing firms in the region to withdraw their staked ETH. Kraken was fined $30 million by the SEC in February for failing to register its staking services, and the regulator has also filed charges against Gemini while issuing a Wells notice to Coinbase.

Meanwhile, Celsius creditor and crypto blogger Tiffany Fong shared a screenshot of the bankrupt lender’s monthly fee statement on April 14. The statement includes a $72,000 invoice titled “Tiffany Fong litigation,” suggesting that Celsius wants to sue Fong. With approximately $119,000 locked in the firm, Fong has been actively reporting on the Celsius bankruptcy case while sharing leaked internal information.

Celsius Withdraws Over $13 Million of Ethereum from Staking

Celsius, a bankrupt crypto lender, has withdrawn over $13 million worth of Ethereum from staking. This includes 6,521 staked Ethereum that the firm withdrew since the network-enabled withdrawals through the Shapella upgrade. On April 14, on-chain investigator Lookonchain reported that $504.5 million worth of Ethereum had been withdrawn, with Celsius, liquid staking protocol Lido, and Figment being the top three addresses.

According to blockchain analytical firm Nansen, Celsius has withdrawn 4,991 ETH as of April 13, equating to 3.64%. Additionally, the lender holds 410,378 staked ETH worth $862.45 million. Pending withdrawals of staked assets by other centralized crypto exchanges account for around 85% of entities waiting to withdraw, with Kraken accounting for most of the pending withdrawals with 556,321 ETH.

Regulatory actions in the United States could be forcing firms in the region to withdraw their staked ETH. In February, the SEC fined Kraken $30 million for failing to register its staking services. The regulator has also filed charges against Gemini and issued a Wells notice to Coinbase.

Celsius Plans to Sue Creditor for Leaking Confidential Information

Crypto blogger Tiffany Fong has claimed that Celsius wants to sue her in an April 14 tweet. Fong shared a screenshot of the bankrupt lender’s monthly fee statement, including a $72,000 invoice titled “Tiffany Fong litigation.” As a Celsius creditor with about $119,000 locked in the firm, Fong has been actively reporting on the Celsius bankruptcy case while sharing leaked internal information. The blogger also got the broader market attention when she interviewed the founder of the now-defunct crypto exchange, FTX, Sam Bankman-Fried.

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Bankman-Fried tweeted that the company’s offer is based on “fair market pricing, no discounts” in response to BnkToTheFuture creator Simon Dixon’s claim that FTX was seeking financing at a $32Billion value to purchase Celsius for “cents on the dollar.” The founder of FTX replied that their purpose isn’t to earn funds purchasing assets for pennies on the dollar; rather, they aim to make the consumers whole again.

On September 27th, rumors began circulating that FTX had submitted the highest offer to acquire Voyager Digital in a transaction valued at $1.4 billion. However, the platform did indicate that users will be allowed to trade and keep cryptocurrencies following the end of the company’s chapter 11 litigation on the FTX US, which is the sole piece of information provided about the future of Voyager clients and their bitcoin holdings. However, it appears that Celsius’ depositors are in an even more precarious position at this time, with the consensus being that the company may look to auction off its billions of dollars’ worth of assets.

Alternatively, the company may propose a plan to repay customers in Celsius (CEL) tokens. An independent investigation of Celsius’s finances is underway, and the results of this investigation will have a significant bearing on the course of the bankruptcy proceedings. Celsius has received pushback from many authorities for its proposed sale of stablecoin holdings, and the DOJ has raised concerns about the company’s request to allow withdrawals for some consumers before the examiner report is finalized.

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The committee asked Coinbase, FTX, Binance.US, Kraken, and KuCoin what they are doing to safeguard customers from scams and halt cryptocurrency-related fraud in a series of letters addressed Tuesday morning to the Treasury, the FTC, the CFTC, and the SEC.

How Do Crypto Scammers Work

Scammers have profited as a result of frequent reports of growing prices and unexpected wealth. This has attracted both experienced and novice investors to cryptocurrencies. Because there is no central authority that can flag suspicious transactions, transactions made with cryptocurrencies cannot be reversed, and most people are unaware of how they operate, fraudsters prefer to use this for their dirty games.

The letters want responses from the government and bitcoin exchanges by September 12 with suggestions for safeguarding users. The committee said that these answers could help make laws.

The letters want records from the exchanges that go back to January 1, 2009 that demonstrate what companies have done to combat cryptocurrency fraud and scams, “detect, investigate, or flag possible fake digital assets or accounts,” and discuss the adoption of stronger regulations.

The committee claims that although some exchanges assess cryptocurrencies before listing them, others do not (in a letter to Sam Bankman-Fried, CEO and creator of FTX).

37% of the money made by crypto scams last year came from “rug pulls.” This is when people announce a token on an exchange, make a big deal out of it, and then disappear.

Since Voyager Digital and Celsius filed for bankruptcy, worries regarding the security of cryptocurrency assets kept on centralized systems have increased. Retail traders preferred these two systems because they consistently provided returns in the double digits. The demise of these two platforms raises the issue of who really has ownership of bitcoin assets when a company holding them fails. Customers do not have an assurance that their money would be returned since they are not federally insured bank depositors in the bankruptcy proceedings for Voyager and Celsius.

Investor-crypto exchange rules might alter. According to Coinbase, its clients would be considered “general unsecured creditors” in the case of bankruptcy.

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