Emily Walker
The legal conflict between the failed cryptocurrency lending service Celsius and the bankrupt exchange FTX has advanced to a new stage.
Recently, Celsius submitted an appeal against the decision made by Judge John T. Dorsey, which dismissed its claim for $444 million against FTX.
This disagreement originated from Celsius accusing FTX of making “preferential transfers” and “derogatory comments” that purportedly sped up its financial downfall.
Main Legal Issues and Court Decision
The case hinges on the validity of Celsius’ original claims and whether its revised submissions followed proper procedures.
Initially, Celsius aimed to recover $2 billion, alleging that FTX officials made harmful and unverified statements about its financial health.
Celsius has filed an appeal against Judge Dorsey’s ruling in the FTX case
This appeal will be considered in District Court
Key Details:
1) Celsius initially claimed $2bn for disparagement before the deadline
2) Celsius later adjusted its claim to $444m for a preferential claim after the deadline… pic.twitter.com/evaBzMi5Lt
— Sunil (FTX Creditor Champion) (@sunil_trades) January 1, 2025
Although Celsius later revised this to a claim for $444 million tied to “preferential transfers,” the court determined that its initial brief mention of potential claims was “insufficient” to support its assertion.
When Celsius updated its claim emphasizing the $444 million in preferential transfers, Judge Dorsey ruled that the submission was “procedurally improper.”
The court identified four critical issues with the revised claim: it was filed late without proper authorization, lacked sufficient links to the initial claim, failed to explain the delay, and could harm FTX’s restructuring efforts.
These points collectively resulted in the dismissal of Celsius’ revised claim. In response, Celsius contended that its original filing sufficiently expressed its intentions regarding avoidance claims.
Additionally, the company insisted that its filings were consistent with Bankruptcy Code requirements and aimed to keep its claims valid throughout the legal process.
Future Actions in the Legal Case
The notice of appeal, lodged by Celsius litigation administrator Mohsin Meghji on December 31, shows the company’s determination to pursue its claims against FTX.
The appeals will examine if Celsius’ original claims met legal expectations and whether its revised claims could be accepted despite procedural issues.
Creditors of FTX, represented by activist Sunil Kavuri, have expressed doubts about the validity of Celsius’ claims, highlighting the significant lag in submitting amended claims and unclear adherence to procedures.
It’s important to note that the outcome of this appeal will significantly impact both bankruptcy cases and their creditors, as hundreds of millions of dollars are involved.
Featured image created with DALL-E, Chart from TradingView