Celsius network filed a notice of appeal on Dec. 31, challenging Judge John Dorsey's decision not to allow the bankrupt lender to crypto $2 billion defamation claim Against the lost cryptocurrency exchange FTX.
The appeal, which is now up for review in district court, marks the latest development in the ongoing legal battle between the two cryptocurrency companies.
Contempt charges
The appeal stems from Celsius' claims that defamatory statements made by FTX's directors, employees and affiliates adversely affected the company's reputation and financial health and allegedly precipitated its July 2022 bankruptcy.
Celsius claimed that FTX's public comments undermined trust in its services and led customers to withdraw funds, ultimately pushing the platform into bankruptcy.
According to court filings, Celsius initially filed a $2 billion claim citing “unsubstantiated and defamatory statements” published by FTX insiders. However, FTX resisted the claim, arguing that Celsius' claims lack sufficient evidence and fall outside the scope of bankruptcy claims.
Amended claim
In December, more than a year after the initial claim, Celsius amended its filing and reduced the amount sought to $444 million. The revised claim shifted focus to preferential transfers and claimed that certain payments made to FTX prior to its bankruptcy should be clawed back.
However, Judge Dorsey dismissed both the original and amended claims citing a procedural defect.
The ruling found that Celsius failed to seek court approval for the late amendment and ultimately sustained FTX's objection. The Dorsey conclusion emphasized that an amended claim cannot circumvent procedural requirements regardless of the substantive nature of the claims.
The case highlights the intense legal battles raging across the crypto sector as companies embroiled in bankruptcy proceedings try to recover assets and cut losses. Celsius' pursuit of claims against FTX is indicative of a broader pattern of creditors and counterparties vying for leverage in ongoing bankruptcy negotiations.
