In a recent development in the ongoing bankruptcy case of collapsed crypto lending platform Celsius, the company 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. Later, the company revised its claim to focus on ‘preferential transfers’ that gave special treatment to some creditors and not others, claiming damages of $444 million.
Judge Dorsey’s Ruling
In December, Judge Dorsey disallowed both claims, finding that Celsius’ original proofs of claim were insufficient to preserve their preference claims. The court ruled that Celsius did not seek leave to amend its claims, the amendments were not sufficiently related to the original claims, and the company offered no explanation for the delay in filing.
Celsius Files Notice of Appeal
On December 31, Mohsin Meghji, the litigation administrator for Celsius Network and its affiliated debtors, filed a notice of appeal regarding Dorsey’s memorandum opinion and order. The notice of appeal is a formal request to review Judge Dorsey’s decision by a higher court.
Sunil Kavuri Weighs In
In a January 2 post, Sunil Kavuri, an FTX creditor activist, commented on the situation, stating 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. Kavuri noted that Celsius claimed FTX officers made ‘unsubstantiated and disparaging statements’ about the firm’s balance sheet and financial condition in its first claim.
Celsius’ Counterarguments
In response to Judge Dorsey’s ruling, Celsius counters that the original proofs of claim were sufficient to put the debtors on notice of alleged avoidance claims. The company argued that at a minimum, these claims constituted protective proofs of claim sufficient to meet the requirements of the Bankruptcy Code.
Repayment and Distribution Efforts
According to an August court filing, Celsius repaid approximately $2.53 billion to around 250,000 creditors, representing approximately 84% of the assets owed. In late November, the company said it would soon distribute an additional $127 million to creditors from its litigation recovery account.
Celsius Native Token (CEL) Performance
The Celsius native token (CEL) surged 350%, hitting $0.56 in September following the $2.5 billion repayment. However, since then, the token has lost most of those gains, falling back below $0.20, down 97.5% from its all-time high at the time of writing.
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