Celsius Network has taken a significant legal step by filing a notice of appeal against a ruling that dismissed its $2 billion disparagement claim against FTX, a defunct crypto exchange. The appeal, set for review in the District Court, is the latest development in the legal dispute between the two cryptocurrency companies.
The crux of the matter lies in Celsius’ allegations that defamatory statements made by FTX executives, employees, and affiliates had a detrimental impact on Celsius’ reputation and financial stability, ultimately leading to its bankruptcy in July 2022. Celsius claims that negative comments from FTX caused a loss of customer trust, resulting in fund withdrawals and the eventual insolvency of the platform.
Celsius initially filed a $2 billion claim based on what it described as “unsubstantiated and disparaging statements” made by FTX insiders. However, FTX disputed the claim, arguing that Celsius failed to provide sufficient evidence and that the claim fell outside the scope of bankruptcy proceedings.
Amended Claim and Court Ruling
In December, Celsius amended its claim, reducing the amount to $444 million and shifting the focus to preferential transfers. The amended claim alleged that certain payments made to FTX before its bankruptcy should be recovered. However, Judge Dorsey rejected both the original and amended claims, citing procedural deficiencies.
The ruling emphasized that Celsius had not sought court approval for the late amendment, leading to the dismissal of the claim. Despite the substantive nature of the allegations, the court highlighted the importance of adhering to procedural requirements.
This legal battle between Celsius and FTX underscores the ongoing challenges faced by cryptocurrency firms involved in bankruptcy proceedings. The pursuit of claims against counterparties and creditors is a common theme as companies seek to recover assets and limit losses in a volatile market.
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