TL;DR
- Celsius appealed a court decision that rejected its $444 million claim against FTX, part of its ongoing bankruptcy proceedings.
- The legal battle began in early 2024 with Celsius initially seeking $2 billion in damages, later revised to focus on “preferential transfers.”
- Despite legal challenges, Celsius has made significant efforts to repay creditors, distributing over $2.53 billion and announcing an additional $127 million payout.
Celsius, the now-defunct cryptocurrency lender, has submitted an appeal challenging a court decision that rejected its claim of $444 million against FTX. This move is part of Celsius’s ongoing bankruptcy proceedings, as the company seeks to recover substantial funds from the collapsed crypto exchange.
Background of the Dispute
The legal battle between Celsius and FTX began in early 2024 when Celsius initially sought $2 billion in damages. The company accused FTX officers of making “unsubstantiated and disparaging statements” that allegedly hastened Celsius’s collapse.
Later, Celsius revised its claim to focus on “preferential transfers,” arguing that certain transactions unfairly favored specific creditors. The adjusted claim stood at $444 million.
Court Ruling and Appeal
In December 2024, Judge John Dorsey dismissed both of Celsius’s claims. He ruled that Celsius’s original proof of claim only briefly mentioned a potential preferential transfer investigation, which was insufficient to validate the claim.
Additionally, the court found that Celsius’s amended claims, filed in July 2024, were improper. The amendments were not sufficiently linked to the original claims, and Celsius had not sought permission to amend them. The court also noted that the changes would disrupt FTX’s reorganization efforts.
Undeterred, Celsius filed a notice of appeal on December 31, 2024, challenging Judge Dorsey’s ruling. The appeal aims to overturn the court’s decision and allow Celsius to pursue its claims against FTX.
Financial Impact and Payouts
Despite the ongoing legal challenges, Celsius has made significant efforts to repay its creditors. In August 2024, the company distributed over $2.53 billion to approximately 251,000 creditors, covering nearly two-thirds of eligible claims. By November, Celsius announced an additional $127 million payout to creditors, covering around 60% of their claims.
Legal Troubles for Celsius Founder
Adding to Celsius’s woes, its founder Alex Mashinsky pleaded guilty to commodities fraud and price manipulation of the Celsius token in December 2024. The most serious charge carries a potential 20-year prison sentence, with sentencing scheduled for April 2025.
The appeal filed by Celsius marks a critical juncture in its ongoing legal battle with FTX. As the case progresses, it highlights the complexities and risks inherent in the cryptocurrency industry. Both companies face significant challenges as they navigate their respective bankruptcy proceedings and seek to resolve their disputes.
