Collapsed Crypto Lending Platform Celsius Files Notice of Appeal Against FTX
In a recent development in the ongoing bankruptcy case of collapsed crypto lending platform Celsius, the firm has filed a notice of appeal against Judge John T. Dorsey’s order that disallowed its claims for damages from FTX.
Background on the Claims
Celsius had initially claimed $2 billion in damages over alleged "disparaging statements" made by FTX officers against Celsius, which allegedly accelerated its fall. However, it later revised the claim to focus on "preferential transfers" that gave special treatment to some creditors and not others, claiming damages of $444 million.
Judge Dorsey’s Decision
In December, Judge John T. Dorsey disallowed both claims, finding that Celsius’ original proofs of claim were insufficient to preserve their preference claims. The court ruled that Celsius’ amended proofs of claim filed in July 2024 were improper because the firm didn’t seek leave to amend, the amendments were not sufficiently related to the original claims, and Celsius offered no explanation for the delay in filing.
Celsius’ Notice of Appeal
On December 31, the litigation administrator for Celsius Network and its affiliated debtors, Mohsin Meghji, filed a notice of appeal regarding Dorsey’s memorandum opinion and order. The notice of appeal argues that the original proofs of claim were sufficient to put the debtors on notice of alleged avoidance claims, and at a minimum constitute protective proofs of claim sufficient to meet the requirements of the Bankruptcy Code.
Sunil Kavuri’s Perspective
Sunil Kavuri, an FTX creditor activist, commented in a January 2 post that Celsius filed a $2 billion claim for disparagement before the bar date and then filed a $444 million amended claim for a preference claim after the bar date. According to Kavuri, Celsius claimed FTX officers made "unsubstantiated and disparaging statements" about the firm’s balance sheet and financial condition in its first claim, and then claimed $444 million in transfers to FTX entities should be returned to the bankruptcy estate in its amended claim.
Celsius’ Response
In response to Judge Dorsey’s decision, Celsius counters that the original proofs of claim were sufficient to put the debtors on notice of alleged avoidance claims. The firm also argued that at a minimum, the original proofs of claim constitute protective proofs of claim sufficient to meet the requirements of the Bankruptcy Code.
Impact on Creditors
According to an August court filing, Celsius repaid about $2.53 billion to around 250,000 creditors, representing approximately 84% of the assets owed. In late November, the lending firm said it would soon distribute an additional $127 million to creditors from its litigation recovery account.
Celsius Native Token (CEL)
The Celsius native token (CEL) surged 350%, hitting $0.56 in September following the $2.5 billion repayment. However, it has since lost most of those gains, falling back below $0.20, down 97.5% from its all-time high at the time of writing.
Implications for Crypto Market
The ongoing bankruptcy case and Celsius’ claims against FTX have significant implications for the crypto market. The collapse of Celsius highlights the risks associated with decentralized finance (DeFi) lending platforms and the need for robust regulatory frameworks to protect investors.
Key Takeaways
- Celsius has filed a notice of appeal against Judge John T. Dorsey’s order that disallowed its claims for damages from FTX.
- Celsius initially claimed $2 billion in damages over alleged "disparaging statements" made by FTX officers, but later revised the claim to focus on "preferential transfers".
- The court ruled that Celsius’ amended proofs of claim were improper because the firm didn’t seek leave to amend and offered no explanation for the delay in filing.
- Celsius counters that the original proofs of claim were sufficient to put the debtors on notice of alleged avoidance claims.
Related Reading
- Celsius sues Tether, seeking $3.5B over Bitcoin collateral sell-off: In a separate lawsuit, Celsius is seeking $3.5 billion from Tether over the sale of Bitcoin collateral.
- Magazine: Will ETH outperform BTC in Jan? IRS DeFi broker rules, and more: Hodler’s Digest: This article provides an overview of recent developments in the crypto market, including the potential for Ethereum to outperform Bitcoin in January.
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