Celsius to Appeal Ruling That Rejected $444M Claim Against FTX

Crypto lending platform Celsius has officially filed an appeal against a judge’s decision to dismiss its claims for damages related to FTX as part of the ongoing bankruptcy proceedings.
Celsius initially sought to recover up to $2 billion in damages, alleging that disparaging statements made by FTX executives contributed to the collapse of the company. However, the claim was later revised to focus on “preferential transfers” – alleging that some creditors received special treatment over others. This amended claim sought damages amounting to $444 million.
In December, Judge Dorsey ruled against both of Celsius’ claims, citing procedural issues and insufficient evidence to support the claims. The judge found that Celsius’ original claims, which included a brief reference to investigating potential preferential transfers, failed to meet the necessary legal standards to preserve the claims in the bankruptcy proceedings.
On December 31, Mohsin Meghji, the litigation administrator for Celsius Network and its affiliated debtors, filed a notice of appeal, challenging Judge Dorsey’s memorandum opinion and the order that disallowed the claims.
Background on Celsius’ Claims
Celsius’ claims stemmed from its bankruptcy case, which has been a focal point for many creditors in the crypto space. Initially, Celsius filed a $2 billion claim, accusing FTX of making “unsubstantiated and disparaging statements” regarding the company’s balance sheet and financial condition. The firm argued that these statements played a significant role in accelerating Celsius’ downfall.
Subsequently, Celsius filed an amended claim for $444 million, focused on the argument that certain transfers to FTX entities should be returned to its bankruptcy estate. These transfers were said to be preferential, providing FTX creditors with an unfair advantage over others.
However, Judge Dorsey ruled that the amended claims filed in July 2024 were improper. The court cited several reasons for the dismissal, including the fact that Celsius had not sought permission to amend its claims, the amendments were deemed unrelated to the original claim, and Celsius failed to explain the delay in filing the updated claims. The judge also noted that allowing the amendments would prejudice FTX’s ongoing reorganization process.
In its appeal, Celsius counters that the original proofs of claim were sufficient to alert the debtors to the potential avoidance claims, arguing that they should be considered protective proofs of claim under the Bankruptcy Code.
Celsius’ Financial Recovery and Token Performance
In the wake of its bankruptcy, Celsius has made significant efforts to repay its creditors. As of August, the company had repaid approximately $2.53 billion to around 250,000 creditors, covering roughly 84% of the assets owed. Additionally, in late November, Celsius announced it would soon distribute an extra $127 million from its litigation recovery account.
Despite these efforts, the performance of Celsius' native token (CEL) has been volatile. After a surge of 350% in September, reaching a price of $0.56, CEL has since lost much of its gains, currently trading below $0.20, which represents a 97.5% decline from its all-time high.
As Celsius continues its legal battles and seeks to recover further funds, the outcome of this appeal against the FTX claims will have significant implications for the company and its creditors. The case highlights the challenges faced by crypto companies in navigating bankruptcy proceedings and the broader complexities of the crypto lending industry.
Disclaimer: The content on this website is for informational purposes only and does not constitute financial or investment advice. We do not endorse any project or product. Readers should conduct their own research and assume full responsibility for their decisions. We are not liable for any loss or damage arising from reliance on the information provided. Crypto investments carry risks.