Defunct crypto lender Celsius Network has appealed a recent court ruling that dismissed its $444 million damages claim against FTX, according to activists representing FTX creditors.
According to court filings, Celsius initially sought up to $2 billion in damages, accusing FTX officials of making “unsubstantiated and disparaging statements” about its financial stability, which allegedly hastened its collapse in 2022. However, Celsius later reduced the claim to $444 million, focusing on “preferential transfers” that prioritized specific creditor repayments.
The firm is appealing Judge John Dorsey’s dismissal of its claim in the FTX bankruptcy proceedings, which aims to compensate the exchange’s creditors. In December, Judge Dorsey rejected the revised claim, stating that Celsius’ original proof did not meet bankruptcy law standards. The amended claim was submitted after the deadline and was deemed unrelated to the original filing, lacking sufficient justification for the delay.
Celsius argues that its original filing should suffice to notify debtors of its claims. However, FTX debtors contended that the initial and revised claims lacked adequate evidence to support the damages request.
This legal battle unfolds as Celsius works to distribute $127 million from its litigation recovery account to creditors. This marks the second payout from its estate and will be funded through the “Litigation Recovery Account.” Eligible creditors include participants in the “Earn” program, retail borrower depositors, and individuals with unsecured or withheld claims, categorized under creditor classes 2, 5, 7, 8, and 9. The payment will be made in BTC or USD based on eligibility.
Meanwhile, its former CEO, Alex Mashinsky, was recently released on a $40 million personal recognizance bond after being arrested on fraud charges. On July 13, 2023, he was arrested by the U.S. Department of Justice over seven criminal charges against him, including securities fraud, wire fraud, commodities fraud, and price manipulation. However, Mashinsky pleaded not guilty to the charges laid against him.
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