The ongoing legal battle between collapsed cryptocurrency lending platform Celsius and bankrupt cryptocurrency exchange FTX appears to have now entered another phase.
Celsius recently foot Notice of Appeal against Judge John T. Dorsey’s ruling, which “dismissed its $444 million claim” against FTX.
According to reports, the dispute stems from the collapsed cryptocurrency lending platform’s allegations of “preferential transfers” and “derogatory statements” by FTX officials that allegedly accelerated the lending platform’s financial collapse.
Main legal arguments and court ruling
The legal dispute revolves around the sufficiency of the preliminary evidence of Celsius’s claim and the procedural validity of its amended filings.
Initially, the collapsed cryptocurrency lending platform sought $2 billion in damages, alleging that FTX officials made unsubstantiated and damaging statements about the lending platform’s financial condition.
Celsius has filed a notice of appeal against Judge Dorsey’s ruling regarding the FTX debtor
He was elected to hear the appeal in the District Court
facts
1) Celsius filed a $2 billion claim for disparagement prior to the ban date2) Celsius filed a $444 million amended claim for post-ban preference claim… pic.twitter.com/evaBzMi5Lt
— Sunil (Champion FTX Creditor) (@sunil_trades) January 1, 2025
Although this claim was later revised, focusing instead on “preferential transfers” totaling $444 million, in its original filing, Celsius included only a brief reference to investigating potential preference claims, which ruled The court found it “insufficient” to support its claims.
When the collapsed cryptocurrency lending platform later filed an amended claim focusing on the alleged preferential transfers of $444 million, Judge Dorsey found the amendment “procedurally inappropriate.”
The court highlighted four key issues with Celisus’s amended claim: it was filed after the embargo date without authorization, lacked sufficient connection to the original claim, did not justify the delay, and would cause undue prejudice to FTX’s ongoing reorganization process.
Combined, these factors led to the collapsed cryptocurrency lending platform’s revised claim being denied. In response, Celsius said its initial filing should have been sufficient to indicate its intentions regarding the invalidation claims.
Furthermore, the company stated that its applications complied with the requirements of the Bankruptcy Code and served as preventative measures to ensure that claims remained valid during the legal proceedings.
Next steps in the legal battle
The notice of appeal, filed by Celusia Litigation Director Mohsen Meghji on December 31, indicates the company’s intent to continue pursuing its claims against FTX.
The appeals will focus on whether the original evidence of claim submitted by Celsius met the necessary legal standards and whether its amended claims should have been accepted despite the procedural delay.
FTX’s creditors, represented by activist Sunil Kavori, have raised concerns about the legality of Celsius’ claims, citing significant delays in filing amended claims and a lack of clear procedural compliance.
It is worth noting that the outcome of this appeal will have significant implications for both the bankrupt entities and their creditors, as hundreds of millions of dollars are at risk.
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