The ongoing legal drama between Celsius Network and FTX takes a significant turn as the crypto lending firm has announced its decision to appeal a judge’s order that dismissed its claims for $444 million in damages. The appeal comes on the heels of two previous claims, both disallowed by Judge Dorsey due to procedural inadequacies.
Celsius’s Attempt to Regain Lost Funds
Celsius had initially sought a staggering $2 billion in damages, accusing FTX officers of making unsubstantiated and disparaging statements regarding Celsius’s financial health. This claim aimed to highlight the detrimental impact these statements had on Celsius’s standing in the crypto market, which arguably contributed to its downfall. Following the initial claim, Celsius revised its request to focus on $444 million, asserting that this amount represented preferential transfers to certain creditors.
Judge Dorsey’s ruling in December brought a setback for Celsius, as he found the original claim insufficiently detailed to warrant the requested damages. According to the judge, the proofs of claim filed by Celsius lacked adequate explanation and did not adhere to required procedural guidelines, leading to their dismissal.
The Legal Journey Ahead
In response to this ruling, Celsius’s litigation administrator, Mohsin Meghji, filed a notice of appeal. He stated that the original proofs were adequate to notify FTX of the alleged claims and should at least qualify as protective.
Critically, the timing of Celsius’s claims has been under scrutiny. After filing its initial claim before the bar date, the amended claim for the $444 million was submitted after the deadline, raising questions about procedural compliance. While Celsius maintains that its original more generalized claims were sufficient, the court deemed the amendments too disconnected from the original claims.
Impact on Creditors and Market Sentiment
Interestingly, Celsius has been making strides in repaying its creditors throughout the bankruptcy proceedings. They have reportedly returned around $2.53 billion to approximately 250,000 creditors, representing 84% of owed assets. Additionally, a further distribution of $127 million is anticipated from Celsius’s litigation recovery account.
This situation underlines the volatility within the crypto lending sector, as Celsius’s native token (CEL) experienced fluctuations—seeing a substantial increase of 350% earlier in the year but has since dwindled significantly. The outcome of this appeal could set critical precedents for claims against insolvent firms in the cryptocurrency domain.
As the legal proceedings continue, stakeholders eagerly await the developments in this high-profile bankruptcy case, which could have far-reaching implications for both Celsius and the broader cryptocurrency ecosystem.
