Key Insights:
- One fiduciary-duty claim remains after 15 Celsius claims were dismissed.
- The surviving case centers on the disputed $3.3 billion 2020 asset disclosure.
- BRIC faces an October 20 deadline for three consumer claims.
Chainalysis faces one remaining Celsius claim after a U.S. Judge dismissed 15 allegations on September 29. The surviving case concerns whether the blockchain analytics firm helped Celsius insiders promote a $3.3 billion asset figure in 2020.
Court narrows celsius litigation
U.S. District Judge Margaret Garnett ruled in the Southern District of New York after reviewing the motion to dismiss. She allowed one aiding-and-abetting claim involving alleged breaches of duty to proceed.
The judge dismissed 12 claims with prejudice, which prevents Celsius from refiling those allegations, in the case. Meanwhile three consumer-protection claims were dismissed without prejudice allowing the plaintiff to amend them.
The Blockchain Recovery Investment Consortium or BRIC brought the lawsuit for the Celsius estate and certain former customers. It has until October 20 to amend the three remaining consumer claims or notify the court that it will not amend them.
Importantly the ruling does not say that Chainalysis actually committed the alleged conduct. Garnett looked at whether the complaint had pleaded allegations that could survive a dismissal. It did not decide the facts of the case.
Disputed audit started with $1.18B
The dispute dates to November 2020, when Celsius executive Timothy Cradle used Reactor to calculate the lender’s assets under management. According to the complaint summarized by the court, the initial calculation produced about $1.18 billion.
Celsius insiders later changed the calculation methodology, including the treatment of CEL holdings. That process ultimately produced an asset figure near $3.3 billion.
On December 9, 2020, Celsius issued a release describing the result as an audit. The statement reported $3,318,368,196.40 in assets and said the calculation used transactions, deposits and withdrawals dating from Celsius’s launch.
The complaint alleges that Chainalysis helped prepare and approve the release. It also alleges that the firm knew descriptions involving an audit and independent verification were inaccurate or misleading.
Garnett found those allegations sufficient at this stage to support claims that the firm knew about the alleged false statements and provided substantial assistance in distributing them.
Most consumer claims fall away
The court rejected a broad set of consumer-protection theories alongside the surviving fiduciary-duty claim. Several failed because the litigation administrator could not legally pursue assigned consumer claims under the relevant state laws.
Other claims faced procedural barriers, including limitations periods and requirements concerning affected consumers. One California claim also failed because the court found the state’s consumer law did not cover the services described in the complaint.
The remaining three consumer claims could still return in amended form. However, the court’s deadline gives BRIC less than three weeks to decide whether further amendments are worthwhile.
Chainalysis also argued that Celsius participated in the conduct and therefore should not recover damages under the in pari delicto doctrine. Garnett declined to resolve that issue at the dismissal stage because the complaint alleged that insiders acted for their own benefit.
Bankruptcy recovery moves forward
The lawsuit is part of BRICs effort to get back money after Celsius collapsed in 2022. Celsius stopped allowing withdrawals in June 2022. Then filed for bankruptcy the next month. This left customers to get access to billions of dollars in money they had invested.
The estate has also taken action against other companies. In September Celsius started another lawsuit asking for 6,360 BTC from BitMEX companies. This is because of what happened in March 2020 when they were liquidated. The estate said those coins were worth about $495 million when they filed the lawsuit.
Legal actions are happening at a time when the crypto market is not doing well. A snapshot from Pluang in October showed that out of 50 cryptocurrencies 24 went up and 25 went down. BAL increased by 11.14% while CRV fell by 3.72%. These changes happened because the market is still not stable as companies work to recover from bankruptcy.
Points shaping the china analysis case
- The remaining claim might start to look at evidence from communications that happened in 2020.
- The deadline on October 20 will decide if three customer claims can come back in a version.
- The court has not yet said if the claims against the company are true.
The decision greatly reduces Celsiuss claims. Keeps the main issue about the 2020 asset disclosure. The next step will be, about what Celsius and its partners knew, how the release was made and if the estate can prove its remaining claims.
