Celsius vs. FTX: $444M Legal Showdown Continues with Appeal

The legal clash between defunct crypto firms Celsius Network and FTX continues as Celsius has filed an appeal challenging a ruling by Judge John Dorsey. The appeal disputes the dismissal of Celsius’ $444 million claim for damages from FTX, part of the broader bankruptcy proceedings involving the failed exchange once led by Sam Bankman-Fried.

The case revolves around Celsius’ allegations that statements made by FTX executives about its financial stability accelerated its downfall in 2022. The appeal seeks to reverse the December decision that dismissed both Celsius’ initial $2 billion claim and its amended $444 million claim.

Celsius Argues for Preferential Repayments

Celsius initially sought up to $2 billion in damages, alleging that FTX’s actions caused substantial harm to its business. However, the firm later revised its claim to $444 million, focusing on “preferential transfers” to prioritize creditor repayments.

FTX debtors opposed the claims, arguing that Celsius’ proof of claim lacked sufficient evidence and that the amended filing was submitted too late. Judge Dorsey sided with FTX, stating that Celsius’ original claim, which contained only a single sentence about investigating preference claims, did not meet the standards required under the Bankruptcy Code.

The court also ruled that Celsius failed to seek permission to amend its claim or explain the delay in filing. These shortcomings led to the dismissal of both the original and amended claims.

Ongoing Fallout from the Collapse

While Celsius pursues its appeal, the company has promised to distribute $127 million to creditors from its litigation recovery account. The firm’s former CEO, Alex Mashinsky, also remains embroiled in legal troubles. In November 2024, a New York federal judge rejected Mashinsky’s attempt to dismiss fraud charges, which include allegations of manipulating the price of Celsius’ native token, CEL.

Mashinsky faces charges of wire fraud and market manipulation, with potential penalties of up to 115 years in prison.

The Celsius appeal adds another layer to the legal battles stemming from the collapse of prominent crypto companies. As the case unfolds, it underscores the high stakes involved in resolving disputes in the wake of the crypto industry’s turbulent 2022.