A federal judge has dismissed most of Celsius Network’s claims against blockchain analytics firm Chainalysis while allowing one to move forward, Crypto.news reported. Judge Margaret Garnett of the U.S. District Court for the Southern District of New York ruled on Sept. 29 that an aiding-and-abetting claim tied to Celsius’s disputed $3.3 billion 2020 “audit” was sufficiently pleaded.
Twelve of the dismissed claims were thrown out with prejudice, meaning they cannot be refiled in their current form, while three were dismissed without prejudice and can be amended by Oct. 20, according to Coincentral. The remaining claim accuses Chainalysis of aiding and abetting an alleged breach of fiduciary duty by Celsius insiders, and is being pursued on behalf of the collapsed lender’s estate by the Blockchain Recovery Investment Consortium (BRIC).
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Key facts
- Judge Garnett dismissed 15 claims against Chainalysis and allowed one fiduciary-duty claim to proceed in a Sept. 29 ruling, per Crypto.news and Coincentral.
- The surviving claim concerns Celsius’s disputed December 2020 release describing $3.3 billion in assets as audited, with the complaint alleging Chainalysis approved the word “audit” five times.
- Twelve claims were dismissed with prejudice; three others can be amended by Oct. 20.
- Celsius executive Timothy Cradle used Chainalysis Reactor on Nov. 2, 2020 and first calculated about $1.18 billion in assets under management, before the methodology changed.
- The original release described the work as Celsius’s first outside asset verification confirming $3,318,368,196.40.
What the surviving claim alleges
The court found that the complaint adequately alleged Chainalysis knew the Dec. 9, 2020 press release contained false statements about Celsius’s assets under management and actively took part in spreading them. Garnett said the allegations went past Chainalysis merely standing by, and that at this stage they sufficiently pleaded the knowledge and “substantial assistance” an aiding-and-abetting claim requires. Among the allegations the court reviewed was that Chainalysis helped draft the release and knew the underlying calculation was not an actual audit or independent verification.
Chainalysis disputed the allegations in its motion to dismiss and sought dismissal of the entire case. The company told Coincentral it was unable to comment on the ruling. Garnett stressed that the ruling came at the motion-to-dismiss stage, where the court must accept well-pleaded allegations as true; the decision does not establish that Chainalysis committed the conduct alleged. Celsius originally announced that Chainalysis had confirmed $3.318 billion in assets using its Reactor software system, and the release quoted Chainalysis executive Jason Bonds saying the company had helped verify the “process and accuracy” of information connected with net funds collected by Celsius.
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The dismissed claims and the in pari delicto defense
The court dismissed Counts Two, Three, Four, Six through Twelve, Fourteen and Fifteen with prejudice, per Crypto.news. Those claims rested on various state consumer-protection and deceptive-practices laws; several failed because the underlying consumer claims could not legally be assigned to the litigation administrator, while others were barred by procedural requirements, statutes of limitations or limits within individual state consumer laws. One California claim failed because the state’s Consumers Legal Remedies Act did not cover the type of crypto-related services alleged.
Counts Five, Thirteen and Sixteen were dismissed without prejudice because the complaint had not identified specific consumers in the relevant states who validly assigned their claims and suffered the alleged harm. Chainalysis also argued that Celsius itself participated in and benefited from the conduct at issue, invoking the doctrine of in pari delicto, under which a party generally cannot recover damages for wrongdoing in which it took part. Garnett acknowledged that was a strong argument — Celsius insiders may have seen short-term benefits as CEL prices and customer numbers rose — but said the factual issue could not be resolved from the complaint alone, so she declined to dismiss Count One on that basis.
Why it matters
The ruling keeps one avenue of potential recovery alive for Celsius creditors while eliminating the bulk of BRIC’s consumer-protection theories against Chainalysis, a firm whose Reactor software sits at the center of a dispute over how the $3.3 billion figure was characterized. The surviving claim turns on whether a company that provides analytics tools can be held responsible for how a client presents that work publicly. The case is one piece of a larger post-collapse recovery effort, running alongside other Celsius estate litigation and creditor distributions.
What to watch
BRIC must file an amended complaint by Oct. 20 covering the three consumer claims dismissed without prejudice, or submit a letter by the same deadline saying it will not amend them. The next fixed event in the Chainalysis litigation is that filing before Judge Garnett.
Sources: crypto.news, Coincentral
