Crypto lending platform Celsius has officially appealed a recent court ruling that dismissed its $444 million claim against bankrupt exchange FTX. This development is part of Celsius’ broader efforts to recover funds as it navigates its own bankruptcy process.
The Disputed Claims Against FTX
Celsius initially sought $2 billion in damages, alleging that FTX executives made false and damaging statements about the company’s financial health. Celsius argued these statements contributed to its financial collapse. Later, the claim was revised to $444 million, focusing on “preferential transfers” that allegedly provided unequal benefits to certain creditors.
However, in December 2024, Judge John Dorsey ruled against both claims. He determined that Celsius’ original filings failed to sufficiently outline their allegations and did not properly preserve the preference claims. Additionally, procedural missteps, such as failing to amend the claim in time, further weakened Celsius’ case.
Appeal Details
On December 31, Mohsin Meghji, the litigation administrator for Celsius and its affiliated debtors, filed a notice of appeal to challenge Judge Dorsey’s decision. Celsius argues that its initial filing should have been enough to meet the requirements of bankruptcy law and that the amended claim was valid despite procedural challenges.
Background on the Claims
Sunil Kavuri, an FTX creditor activist, provided context on January 2, explaining that Celsius submitted a $2 billion “disparagement” claim before the bankruptcy bar date. Later, after the deadline, Celsius filed a $444 million claim asserting preferential transfers. The amended claim demanded that $444 million in transfers made to FTX entities be returned to the bankruptcy estate.
Judge Dorsey dismissed the amended claim, citing multiple reasons:
- Celsius did not seek permission to amend its claim.
- The amended claim was not sufficiently related to the original filing.
- Celsius failed to justify its delay in filing the amendment.
- The late amendment could disrupt FTX’s reorganization process.
Celsius countered these findings, stating that its original proofs of claim should have provided sufficient notice of the avoidance claims.
Celsius’ Efforts to Repay Creditors
Celsius has made notable progress in repaying creditors. By August 2024, the company had repaid approximately $2.53 billion to 250,000 creditors, covering about 84% of its owed assets. Additionally, in November, Celsius announced plans to distribute another $127 million to creditors from its litigation recovery account.
Impact on CEL Token
Celsius’ native token, CEL, saw a dramatic 350% surge in September after the company’s $2.5 billion repayment. However, these gains have since evaporated, with CEL trading below $0.20—down 97.5% from its all-time high.
Celsius’ appeal adds another layer of complexity to its bankruptcy proceedings, as both Celsius and FTX work through their financial troubles. The outcome of the appeal could have significant implications for Celsius’ recovery efforts and the broader cryptocurrency industry.
