Celsius appeals Judge Dorsey’s order dismissing its claims for damages against FTX, citing procedural shortcomings in the bankruptcy case.
Celsius, a crypto lending platform, has submitted a notice of appeal in response to a judge’s order that denied its claims for damages from FTX as part of its ongoing bankruptcy case.
The crypto platform has been attempting to recoup hundreds of millions from FTX, initially claiming $2 billion in damages for alleged “disparaging statements” made by FTX officers against Celsius that accelerated its decline.
The claim was subsequently revised to emphasize “preferential transfers” that granted special treatment to certain creditors while excluding others, resulting in a claim of $444 million in damages.
In December, Judge Dorsey denied both claims, concluding that Celsius’ initial proofs of claim, which consisted of only one sentence regarding the investigation of potential preference claims, were inadequate to maintain their preference claims.
Mohsin Meghji, the litigation administrator for Celsius Network and its affiliated debtors, submitted a notice of appeal on December 31 in response to Judge Dorsey’s memorandum opinion and order.
Context Of Allegations
The crypto lending platform submitted a $2 billion disparagement claim before the bar date and subsequently submitted a $444 million amended preference claim after the bar date, as explained by Sunil Kavuri, an activist for FTX creditor rights, in a post on January 2.
Celsius asserted in its initial claim that FTX officers made “unsubstantiated and disparaging statements” regarding the firm’s financial condition and balance sheet.
Subsequently, it stated in its amended claim that $444 million in transfers to FTX entities should be returned to the bankruptcy estate.
The court determined that Celsius’s amended proofs of claim, which were submitted in July 2024, were improper.
This was due to the fact that the firm did not request permission to amend the documents, the amendments were not sufficiently related to the original claims, Celsius did not provide an explanation for the delay in filing, and the amendments would have a detrimental impact on FTX’s reorganization.
“Celsius argues that the original proofs of claim were adequate to notify the debtors of the alleged avoidance claims and, at the very least, serve as protective proofs of claim that satisfy the Bankruptcy Code’s requirements,” the filing stated.
Celsius repaid approximately $2.53 billion to approximately 250,000 creditors in August, representing approximately 84% of the assets owed. This information was provided in a court filing.
The lending firm announced in late November that it would distribute an additional $127 million to creditors from its litigation recovery account “soon.”
The Celsius native token (CEL) experienced a 350% increase in value, reaching $0.56 in September following the $2.5 billion repayment.
However, it has since lost the majority of its gains, trading below $0.20 and 97.5% below its all-time peak at the time of writing.
