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

As part of its bankruptcy proceedings, Celsius had initially claimed $2 billion in damages from FTX, alleging that FTX officers made "disparaging statements" against Celsius that accelerated its fall. However, this claim was later revised to focus on "preferential transfers" that gave special treatment to some creditors and not others, with Celsius claiming damages of $444 million.

Judge’s Ruling

In December, Judge Dorsey disallowed both claims, finding that Celsius’ original proofs of claim were insufficient to preserve their preference claims. The judge ruled that the amendments made by Celsius to its claims after the bar date were improper because they did not seek leave to amend and would prejudice FTX’s reorganization.

Notice of Appeal Filed

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 filing argues that the original proofs of claim were sufficient to put the debtors on notice of alleged avoidance claims and constitute protective proofs of claim sufficient to meet the requirements of the Bankruptcy Code.

Details of the Claims

Sunil Kavuri, an FTX creditor activist, commented on January 2 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. According to Kavuri, Celsius claimed that FTX officers made "unsubstantiated and disparaging statements" about the firm’s balance sheet and financial condition in its first claim.

Celsius’ Original Claim

In its original claim, Celsius alleged that FTX officers made disparaging statements against the company, which accelerated its fall. However, this claim was later revised to focus on preferential transfers.

Amended Claim

The amended claim filed by Celsius focused on "preferential transfers" that gave special treatment to some creditors and not others. The company claimed damages of $444 million in transfers to FTX entities that should be returned to the bankruptcy estate.

Impact on Celsius’ Native Token (CEL)

The news of Celsius filing a notice of appeal has had a mixed impact on its native token, CEL. In September, the token surged 350%, hitting $0.56 following the $2.5 billion repayment. However, since then, it has lost most of those gains, falling back below $0.20.

Additional Developments

In late November, Celsius announced that it would distribute an additional $127 million to creditors from its litigation recovery account. This distribution is part of the company’s ongoing efforts to repay its creditors.

Conclusion

The filing of a notice of appeal by Celsius against Judge Dorsey’s order highlights the complexities and nuances of the ongoing bankruptcy case. The outcome of this appeal will have significant implications for both Celsius and FTX, as well as the broader crypto community.

Related Developments

  • Celsius Sues Tether, Seeking $3.5B Over Bitcoin Collateral Sell-Off: In a separate development, Celsius has filed a lawsuit against Tether, seeking $3.5 billion in damages over the sale of Bitcoin collateral.
  • IRS DeFi Broker Rules, and More: Hodler’s Digest: This article provides an overview of recent developments in the crypto space, including updates on IRS regulations and more.

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