Celsius Appeals Judge’s Decision Rejecting $444 Million Claim in FTX Case

Highlights:

• Celsius is contesting a court ruling that dismissed its $444 million claim in the FTX case.
• Celsius claims FTX statements hurt its reputation, leading to insolvency and bankruptcy in 2022.
• The company has paid over $2.53 billion to creditors, and Mashinsky faces fraud charges.

Defunct crypto lender Celsius Network has appealed a court ruling that rejected its $444 million claim in the FTX bankruptcy case. The defunct crypto lender filed a notice on Tuesday, aiming to overturn Judge John Dorsey’s December decision.

The Claims Against FTX

Celsius claims FTX executives and affiliates made defamatory statements. These statements hurt Celsius’ reputation and finances. The defunct crypto lender says this contributed to its bankruptcy in July 2022. The company believes FTX’s comments made customers lose confidence. As a result, many withdrew funds, pushing the platform toward insolvency.

An FTX creditor activist, Sunil Kavuri, explained in a Jan. 2 post that Celsius initially filed a $2 billion claim, citing “unsubstantiated and disparaging statements” from FTX insiders. Court filings show that FTX opposed the claim. FTX argued that Celsius’ assertions lacked enough evidence. They also claimed the allegations were beyond the scope of bankruptcy claims.

Celsius Appeals After Dismissal of Revised Claim

In December, over a year after the first claim, Celsius updated its filing. They lowered the amount to $444 million. The new claim focused on payments made to FTX before its bankruptcy, saying they should be returned. However, Judge Dorsey dismissed both the revised and original claims.

Celsius filed a Notice of Appeal against Judge Dorsey's ruling for FTX debtor

Elected for Appeal to be heard in the District Court

Facts
1) Celsius Filed a $2bn claim for disparagement before the bar date

2) Celsius filed a $444m amended claim for a preference claim after bar… pic.twitter.com/evaBzMi5Lt

— Sunil (FTX Creditor Champion) (@sunil_trades) January 1, 2025

The judge ruled that Celsius did not properly support its preferential transfer investigation. He also pointed out that Celsius filed the amendments without seeking proper permission and failed to explain the delay. The judge emphasized that allowing the changes could interfere with FTX’s ongoing reorganization efforts.

The filing read:

“Celsius counters 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.” 

Celsius Payouts and Mashinsky’s Legal Battle

Celsius paid over $2.53 billion to 251,000 creditors in August. This covered nearly two-thirds of creditors and 93% of the claim value. The payments were made in crypto and cash, based on January 16 prices. In November, Celsius revealed an additional $127 million payout, addressing roughly 60% of claims.

Last month, founder Alex Mashinsky was accused of manipulating Celsius’ token, CEL. He faces charges of wire fraud and market manipulation related to the collapse of the crypto lending firm. If convicted, Mashinsky could get up to 115 years in prison. The court has scheduled his sentencing for April.