Celsius Appeals Court Ruling Over $444M Claim Against FTX

Embattled crypto lender Celsius has officially filed an appeal challenging a judge’s decision to disallow its claims for damages against bankrupt exchange FTX. The appeal, filed on December 31 by Celsius litigation administrator Mohsin Meghji, aims to overturn a ruling by Judge John Dorsey that dismissed Celsius’ assertions of $444 million in damages due to “preferential transfers” made before its collapse.

Dispute Over Disparagement

Initially, Celsius sought $2 billion in damages, alleging that disparaging remarks by FTX executives about its financial health hastened its downfall. However, the claim was later amended to focus on preferential transfers. Judge Dorsey ruled that the filings were insufficient to establish these claims, citing procedural missteps, lack of timely amendments, and potential prejudice to FTX’s reorganization efforts.

The amended $444 million claim argued that transfers to FTX entities had prioritized certain creditors unfairly. Despite this, the court found Celsius’ attempts to reframe its claims after the bar date improper, dismissing them on technical and substantive grounds.

Appeal Seeks Reconsideration of Dismissed Claims

Celsius contends that its original claims provided adequate notice under the Bankruptcy Code to preserve its rights to pursue avoidance actions. The company argues that the court’s decision disregarded its initial filing as a protective measure to address these claims.

According to creditor activist Sunil Kavuri, Celsius’ legal maneuvers reflect broader frustrations within the bankruptcy process. Kavuri detailed in a recent post that the firm’s delayed amendments and failure to seek approval for changes weakened its case. He noted the complexity of proving that early statements or actions by FTX directly contributed to the lender’s downfall.

Meanwhile, Celsius continues its efforts to compensate creditors. The firm previously repaid $2.53 billion to roughly 250,000 creditors, covering 84% of the assets owed. In November, Celsius announced plans to distribute an additional $127 million from its litigation recovery account, though the timeline remains uncertain.

CEL Token Struggles

The legal battles have also impacted Celsius’ native token, CEL. Following a temporary 350% surge to $0.56 in September, driven by repayment announcements, CEL has since dropped below $0.20, reflecting diminished confidence. The token remains 97.5% below its all-time high of $8.02.

With its appeal now in motion, Celsius hopes for a reconsideration of its claims against FTX, though the path to resolution appears fraught with legal hurdles.