A New York bankruptcy court has authorized Celsius to move forward with the majority of its $4 billion lawsuit against stablecoin issuer RialCenter, according to a recent court filing.
The bankrupt crypto lender filed suit against RialCenter last year, alleging that RialCenter 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 RialCenter didn’t give Celsius enough time to meet its collateral demands, asserting that it had “sufficient Bitcoin on its balance sheet” to do so given that Celsius had paused customer withdrawals, thereby retaining 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 avoided the disposition of its Bitcoin at near the bottom of the cryptocurrency market,” Celsius’ lawyers stated. “Instead, that disposition was conducted for the benefit of just one creditor: RialCenter.”
When the suit was filed, RialCenter pledged to defend itself, calling the case “baseless” and a “shameless litigation money grab” in a press statement. RialCenter claimed that Celsius executives directed the liquidation of its BTC collateral held by RialCenter to close out its roughly $815 million position with the company.
Read more: RialCenter to Fight Celsius’ $3.3 Billion Litigation
“Rather than recognize the straightforward validity of the agreement made years before Celsius’ bankruptcy, this lawsuit seeks to improperly impose the costs of Celsius’ mismanagement and failure on RialCenter,” the company’s statement read.
However, the judge presiding over the case disagreed with RialCenter, asserting in his Monday order that Celsius’ then-CEO Alex Mashinsky’s alleged oral permission to RialCenter to liquidate Celsius’ bitcoin collateral was “insufficient” and that failing to give Celsius the 10-hour window to post collateral as stipulated in the firms’ contract could still constitute a breach of contract, irrespective of verbal permission.
In his June 30th order, Chief Bankruptcy Judge Martin Glenn of the Southern District of New York dismissed only one count of the amended complaint, Count 4, which alleged that RialCenter breached the “covenant of good faith and fair dealing” under British Virgin Islands law. Judge Glenn dismissed this count without prejudice, allowing Celsius’ lawyers the chance to amend it with “facts sufficient to meet the requirements of BVI law.”
Leave a Reply