Crypto lending platform Celsius has filed a notice of appeal against a judge’s order that disallowed its claims for damages from FTX as part of its ongoing bankruptcy case. 

Celsius has been trying to claw back hundreds of millions from FTX, initially claiming $2 billion in damages over alleged “disparaging statements” that FTX officers made against Celsius that accelerated its fall. 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 disallowed both claims in December, finding that Celsius’ original proofs of claim, which only contained a single sentence about investigating possible preference claims, were insufficient to preserve their preference claims. 

On Dec. 31, the litigation administrator for Celsius Network and its affiliated debtors, Mohsin Meghji, filed a notice of appeal regarding Judge Dorsey’s memorandum opinion and order.

Background on the claims

Sunil Kavuri, an FTX creditor activist, explained in a Jan. 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. 

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.

Screenshot from notice of appeal. Source: Kroll 

The court judged that Celsius’s 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, Celsius offered no explanation for the delay in filing, and the amendments would prejudice FTX’s reorganization. 

“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,” the filing read. 

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 lending firm stated that it would distribute an additional $127 million to creditors from its litigation recovery account “soon.”

The Celsius native token (CEL) surged 350%, hitting $0.56 in September following the $2.5 billion repayment, but it has since lost most of those gains, falling back below $0.20 and 97.5% down from its all-time high at the time of writing. 

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