Nikolas Sargeant
Celsius Network, the bankrupt cryptocurrency lender, has mounted a legal challenge against a recent court decision that rejected its $444 million claim against FTX, filing a notice of appeal on Tuesday as part of its ongoing bankruptcy proceedings.
The dispute traces back to early 2024, when Celsius initially sought $2 billion in damages from FTX, citing alleged "unsubstantiated and disparaging statements" by FTX executives that Celsius claimed accelerated its downfall. The company later shifted its strategy to focus on "preferential transfers," reducing its claim to $444 million while arguing that certain creditors received favorable treatment.
However, in December, Judge John Dorsey dismissed both versions of the claim. The court found that Celsius's original proof of claim contained only a cursory mention of potential preferential transfer investigations, deemed insufficient to support the claim. Additionally, the judge ruled against Celsius's July 2024 amended claims, citing multiple procedural deficiencies: lack of permission to amend, insufficient connection to original claims, unexplained filing delays, and potential disruption to FTX's reorganization process.
Celsius Progress: Major Creditor Payouts Complete as Legal Battles Continue
Despite these legal setbacks, Celsius has made significant progress in compensating its creditors. In August, the company completed a massive distribution of $2.53 billion to approximately 251,000 creditors, representing 93% of total claim value and reaching nearly two-thirds of eligible claimants. The payments, made in both cryptocurrency and cash, were calculated based on January 16 prices. The company further extended its compensation efforts in November, announcing an additional $127 million payout to creditors, fulfilling roughly 60% of their claims.
Meanwhile, the company's legal troubles have extended to its leadership. Former CEO Alex Mashinsky faced a significant legal reckoning last month, pleading guilty to charges of commodities fraud and price manipulation related to the Celsius token. The most serious charge carries a potential 20-year prison sentence, with sentencing scheduled for April 8, 2025.
This latest appeal marks another chapter in the complex unwinding of one of cryptocurrency's most prominent lending platforms, highlighting the ongoing challenges in resolving major crypto bankruptcies. As the case proceeds, it will likely set important precedents for how similar claims are handled in future cryptocurrency bankruptcy proceedings.
