Celsius Network has taken a significant step in its legal battle against FTX by filing a notice of appeal on Dec. 31. This move comes after Judge John Dorsey’s decision to reject Celsius’ $2 billion disparagement claim against the defunct crypto exchange. The appeal is set to be reviewed in the District Court, marking the latest development in the ongoing dispute between the two crypto firms.
The crux of Celsius’ claim lies in allegations of disparagement against FTX. Celsius contends that defamatory statements made by FTX executives, employees, and affiliates had a negative impact on the company’s reputation and financial stability, ultimately leading to its bankruptcy in July 2022. Celsius argues that FTX’s public comments caused a loss of confidence in its services, prompting customers to withdraw funds and contributing to the platform’s insolvency.
Initially, Celsius filed a $2 billion claim based on what it described as “unsubstantiated and disparaging statements” made by FTX insiders. However, FTX challenged the claim, stating that Celsius failed to provide sufficient evidence and that the claim fell outside the realm of bankruptcy proceedings.
In December, Celsius amended its claim, reducing the requested amount to $444 million. The revised claim focused on preferential transfers, alleging that certain payments made to FTX before its bankruptcy should be clawed back. Despite this amendment, Judge Dorsey disallowed both the original and amended claims, citing procedural shortcomings. He emphasized that Celsius had not obtained court approval for the late amendment, ultimately upholding FTX’s objection.
This legal battle underscores the fierce disputes unfolding in the crypto sector as companies in bankruptcy proceedings seek to recover assets and limit losses. Celsius’ efforts to pursue claims against FTX reflect a broader trend of creditors and counterparties vying for advantage in bankruptcy negotiations.
As the case continues to unfold, it will be interesting to see how the District Court reviews Celsius’ appeal and how this ongoing legal confrontation between Celsius Network and FTX will impact the broader crypto industry.
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