The ongoing legal battle between collapsed crypto lending platform Celsius and bankrupt cryptocurrency exchange FTX appears to have now entered another phase.
Celsius recently filed a notice of appeal against Judge John T. Dorsey’s ruling, which “disallowed its $444 million claim” against FTX.
According to reports, the dispute stems from the collapsed crypto lending platform’s allegations of “preferential transfers” and “disparaging remarks” by FTX officers that allegedly accelerated the lending platform’s financial collapse.
Key Legal Arguments and Court Ruling
The legal dispute revolves around the adequacy of Celsius’ initial proofs of claim and the procedural correctness of its amended filings.
Initially, the collapsed crypto lending platform had sought $2 billion in damages, claiming that FTX officers made unsubstantiated and damaging statements about the lending platform’s financial condition.
Celsius filed a Notice of Appeal against Judge Dorsey’s ruling for FTX debtor
Elected for Appeal to be heard in the District Court
Facts
1) Celsius Filed a $2bn claim for disparagement before the bar date2) Celsius filed a $444m amended claim for a preference claim after bar… pic.twitter.com/evaBzMi5Lt
— Sunil (FTX Creditor Champion) (@sunil_trades) January 1, 2025
Although this claim was later revised, focusing instead on “preferential transfers” totaling $444 million, however, in its original filing, Celsius included only a brief reference to investigating possible preference claims, which the court ruled “insufficient” to support its allegations.
When the collapsed crypto lending platform later filed an amended claim focusing on the $444 million in alleged preferential transfers, Judge Dorsey found the amendment “procedurally improper.”
The court highlighted four key issues with Celsius’ amended claim: it was filed after the bar date without permission, lacked sufficient connection to the original claim, did not justify the delay, and would cause undue prejudice to FTX’s ongoing reorganization process.
These factors collectively led to the dismissal of the collapsed crypto lending platform’ revised claim. In response, Celsius argued that its initial filing should have been sufficient to signal its intentions regarding avoidance claims.
Furthermore, the company stated that its filings complied with the requirements of the Bankruptcy Code and served as protective measures to ensure the claims remained valid during the legal proceedings.
Next Steps in the Legal Battle
The notice of appeal, filed by Celsius litigation administrator Mohsin Meghji on December 31, signals the company’s intention to continue pursuing its claims against FTX.
The appeals will focus on whether Celsius’ original proofs of claim met the necessary legal standards and whether its amended filings should have been accepted despite the procedural delays.
FTX creditors, represented by activist Sunil Kavuri, have raised concerns about the legitimacy of Celsius’ claims, noting the significant delay in filing the amended claims and the lack of clear procedural adherence.
It is worth noting that the outcome of this appeal will have significant implications for both bankrupt entities and their respective creditors, as hundreds of millions of dollars are at stake.
Featured image created with DALL-E, Chart from TradingView
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