Tether to Pay $299.5 Million in Celsius Bankruptcy Settlement: Exploring the Accountability of Stablecoin Issuers

Tether, the issuer of the widely-used dollar-based stablecoin USDt (USDT), has agreed to a $299.5 million settlement with the Celsius Network bankruptcy estate, marking a significant chapter in the ongoing debate surrounding the accountability of stablecoin issuers. This agreement addresses controversies tied to Bitcoin-backed collateral liquidation, which preceded Celsius’ bankruptcy filing in mid-2022, and underscores the evolving demands for transparency and responsibility in the cryptocurrency industry.

The Settlement: A Brief Overview

On October 14, the Blockchain Recovery Investment Consortium (BRIC) announced the settlement, closing the door on prolonged legal disputes between Tether and Celsius. Aimed at maximizing creditor recoveries from insolvent crypto asset platforms, BRIC was established early in 2023 as a collaborative initiative between investment management firm VanEck and affiliate GXD Labs of Atlas Grove Partners. Since January 2024, BRIC has officially been serving as both the asset recovery manager and litigation manager for Celsius debtors alongside the official committee of unsecured creditors.

The resolution ends legal battles surrounding the liquidation of Bitcoin collateral tied to loans backed by USDt before Celsius spiraled into bankruptcy proceedings. This liquidation was a focal point of contention, as Celsius alleged improper handling by Tether, leaving unresolved questions regarding creditor obligations and financial ethics in the crypto ecosystem.

Celsius vs. Tether: The Legal Conflict

Celsius had previously taken legal action against Tether, claiming that improper liquidation of Bitcoin collateral effectively triggered the company’s financial downfall. Court documents revealed that Tether sold off the collateral near the debt’s value, leaving Celsius no meaningful assets to stave off insolvency.

While Celsius pursued claims worth approximately $4 billion in damages, the $299.5 million settlement represents only a fraction of the amount originally sought. A bankruptcy court allowed Celsius to continue litigation against Tether in July 2025, but the ramifications of this settlement on subsequent trials and creditors’ recoveries remain uncertain. For now, it signifies a partial conclusion to disputes around this contentious episode.

Growing Legal Risks for Stablecoin Issuers

The Celsius-Tether legal clash shines a spotlight on the increasingly precarious landscape for stablecoin issuers in volatile cryptocurrency markets. Historically, issuers like Tether have maintained a narrow focus on issuing and redeeming tokens, avoiding direct responsibility for how those tokens are utilized. This approach emphasized their role as facilitators rather than arbiters of broader financial risks.

However, as the cryptocurrency sector matures and witnesses high-stakes legal disputes tied to major insolvencies, scrutiny on stablecoin issuers intensifies. Incidents such as Celsius' collapse and the legal proceedings that followed suggest regulators and courts may begin redefining the roles and obligations of entities like Tether. Enhanced accountability in crisis scenarios could become a standard expectation, particularly as regulators seek to shield investors from risks emanating from systemic volatility.

This shifting regulatory focus could lead to stricter oversight, compelling stablecoin issuers to adopt measures ensuring financial responsibility during market disarray. The Tether settlement serves as a bellwether for what’s to come, as regulatory bodies assess their role in stabilizing the crypto ecosystem during high-risk periods.

Fallout from the Crypto Market’s Turbulent Era

Celsius Network’s bankruptcy symbolizes one of the defining events in a catastrophic year for cryptocurrency markets. The series of high-profile collapses that began in 2022 rattled the industry and exacerbated an already harsh crypto winter. When Celsius filed for bankruptcy, it marked the beginning of cascading failures that widened across the sector.

The repercussions of Celsius' downfall extended beyond corporate losses—forcing its former CEO, Alex Mashinsky, to forfeit claims on Celsius’ bankruptcy estate. Mashinsky faced legal consequences for his involvement and, in June, received a 12-year prison sentence on two felony charges. By September, he had formally commenced serving his sentence, offering a stark reminder of accountability within the sector’s leadership.

Celsius was not alone in its downfall during this volatile period. Renowned crypto lenders, including BlockFi, Voyager Digital, and Genesis Global Capital, also succumbed to insolvency, underscoring systemic vulnerabilities across the industry. Adding to the chaos, FTX—one of the largest cryptocurrency exchanges—filed for bankruptcy later that year, driving customer confidence to its lowest point.

Between May and November 2022, users withdrew close to $13 billion from cryptocurrency asset platforms, according to the Chicago Federal Reserve, reflecting the widespread mistrust triggered by these failures. Many investors had been lured by high-yield offerings, some promising returns exceeding 17%. While such incentivized products thrived during bullish market conditions, they proved unsustainable amidst the downturn, leaving customers and creditors exposed to substantial losses.

Implications for Crypto’s Future

The settlement between Tether and Celsius encapsulates broader concerns around the intersection of legal accountability and financial recovery in the cryptocurrency space. As the industry continues to recover from one of its darkest chapters, cases like this serve as pivotal learning moments. Heightened regulatory scrutiny is inevitable, with stablecoin issuers like Tether finding themselves at the epicenter of a changing landscape.

Market participants will closely monitor how Tether and similar entities adapt to newly emerging frameworks for accountability and transparency. In a sector striving to rebuild trust, the outcomes of this case may shape how issuers balance transactional activity with ethical responsibility. For creditors, investors, and regulators alike, this settlement underscores the necessity of vigilance and reform to foster sustainable growth in the cryptocurrency market.

The series of collapses in 2022 reshaped crypto’s trajectory, with ripple effects still felt today. From Celsius to FTX, the scars of that era remain visible. The Tether-Celsius settlement serves as a reminder of the challenges stablecoin issuers and the broader crypto sector must address to regain investor confidence and pave the way for long-term stability.