Judge Throws Out Majority of Celsius Claims Against Chainalysis, $3.3B Audit Case Proceeds
A federal judge in the United States has thrown out the majority of allegations against Chainalysis in the Celsius litigation, though a claim concerning the crypto lender's controversial $3.3 billion audit remains active.
In a significant legal development, a federal judge in the United States has thrown out the vast majority of allegations leveled against Chainalysis by the litigation administrator representing Celsius Network, though one critical claim has been permitted to advance.
The claim that remains standing accuses Chainalysis of assisting Celsius executives in violating their fiduciary responsibilities.
In a decision delivered on Tuesday, US District Judge Margaret Garnett rejected Chainalysis' motion to dismiss the aiding-and-abetting allegation. Her determination found that the legal complaint adequately asserted that Chainalysis was aware a press release issued by Celsius in 2020 included misleading statements and assisted in their distribution.
Judge Garnett threw out 12 additional allegations with prejudice, which bars the plaintiffs from refiling them in the current litigation.
A separate set of three consumer-protection allegations were dismissed without prejudice. The litigation team has been given a deadline of Oct. 20 to either revise these particular claims or notify the court of their decision not to pursue amendments.
The cryptocurrency lending platform Celsius declared bankruptcy in July 2022 amid widespread turmoil in the digital asset markets. The company had suspended customer withdrawals one month prior to the bankruptcy filing, trapping users with approximately $4.7 billion worth of assets. The legal action against Chainalysis represents one component of the bankruptcy estate's broader strategy to reclaim money for those owed funds.
When contacted by Cointelegraph, Chainalysis indicated it could not provide commentary. At the time of publication, the litigation administrator for Celsius had not issued a response.
Celsius lawsuit centers on $3.3 billion "audit"
Back in 2020, Celsius engaged Chainalysis to assist in determining its total assets under management through the use of the firm's Reactor software platform, subsequently promoting the findings publicly as an audit.
Based on the complaint's details as outlined by the court, an executive at Celsius originally determined approximately $1.18 billion in total assets using the Reactor platform before modifications to the calculation approach resulted in the amount increasing to around $3.3 billion.
On Dec. 9, 2020, a press release was issued announcing an "audit" that verified approximately $3.3 billion in Celsius holdings using Chainalysis Reactor, calculated from transaction data, aggregate deposits and aggregate withdrawals dating back to when Celsius introduced the service in 2018.
The legal complaint asserts that Chainalysis participated in drafting, revising and approving the press release while possessing knowledge that characterizations of the work as an "audit" and "independent verification" were either inaccurate or significantly misleading.
These allegations remain unproven in court, and Chainalysis had petitioned for complete dismissal of the complaint.
The Blockchain Recovery Investment Consortium, known by the acronym BRIC, filed the legal action. The organization serves as both litigation administrator and recovery manager for the Celsius bankruptcy estate and is advancing claims representing both Celsius and specific former account holders.