- The collapse of FTX has dragged down many crypto companies
- Celsius has filed a lawsuit for compensation and damages
- Judge John T. Dorsey disallowed the lawsuit, but the company has filed an appeal
After FTX’s collapse, many other crypto companies fell with it, including cryptocurrency lending platform Celsius. The company continued to fight even after Judge John T. Dorsey’s decision to reject its claim for damages and compensation.
On December 31, litigation administrator for Celsius Network and its affiliated debtors, Mohsin Meghji, filed an appeal, seeking $2B in compensation for the collapse of their platform and $444M in damages.
History Behind the Celsius vs. FTX Case
Celsius declared bankruptcy in July 2022, but tried to behave in good faith and compensate the users of the platform. According to their statements, they have paid out $2.53B to approximately 250,000 creditors, representing approximately 84% of assets owed, and in late November promised to distribute an additional $127M to creditors from their litigation recovery account.
In doing so, Celsius filed an initial lawsuit against FTX for $2B in damages for “unsubstantiated statements” about the company’s balance sheet that precipitated its collapse. Later, in December 2024, Celsius filed an amended complaint in which it added $444M in damages.
Judge John T. Dorsey disallowed Celsius’ suit where they insisted on “preferential transfers” that gave special treatment in compensating certain investors and sought $2B in damages for derogatory statements from FTX and later $444M in damages. He deemed the grounds for the claim insufficient and pointed out that they contained only a single sentence about investigating possible preference claims.
And on December 31, 2024, we see Celsius appealing against this decision:
“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.”
Conclusion
The collapse of FTX is still having an effect on the entire crypto industry, so big numbers were involved. We’ll see how the court handles this, and whether they see it as a hindrance to FTX’s bankruptcy restructuring.
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