Crypto01 October, 20262 min read
Margaret Garnett Lets Chainalysis Aiding-And-Abetting Claim Proceed Over Celsius $3.3 Billion Audit
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Judge Garnett allowed aiding-and-abetting claim against Chainalysis to proceed. Most Celsius claims against Chainalysis were dismissed by the court.
Celsius audit case survives
A U.S. federal judge dismissed most claims brought against Chainalysis by Celsius Network’s litigation administrator, but allowed one aiding-and-abetting claim to proceed over Celsius’ disputed $3.3 billion 2020 “audit.”
US District Judge Margaret Garnett denied Chainalysis’ bid to dismiss the aiding-and-abetting claim in a ruling issued Tuesday, and she found the complaint sufficiently alleged that Chainalysis knew a 2020 Celsius press release contained false statements and helped disseminate them.
The court dismissed 12 other claims with prejudice, preventing the plaintiffs from amending them in this case, and it dismissed three consumer-protection claims without prejudice.
The plaintiffs have until Oct. 20 to amend those claims or tell the court they will not do so, and the Chainalysis lawsuit is part of the estate’s effort to recover funds for creditors.
Celsius filed for bankruptcy in July 2022 after it froze withdrawals a month earlier, leaving customers unable to access about $4.7 billion in assets.
What the court said
The surviving claim accuses Chainalysis of aiding and abetting alleged breaches of fiduciary duty by Celsius insiders tied to the lender’s disputed 2020 release describing $3.3 billion in assets as audited.
The court said the complaint adequately alleged that Chainalysis knew a December 2020 press release contained false statements about Celsius’s assets under management and actively participated in spreading them.
The court also treated the dispute over the underlying calculations as allegations at the motion-to-dismiss stage, including the complaint’s account that a Celsius executive initially calculated about $1.18 billion in assets using Reactor before changes to the methodology increased the figure to roughly $3.3 billion.
On Dec. 9, 2020, Celsius announced an “audit” confirming exactly $3,318,368,196.40 in assets using Chainalysis Reactor, and the release described the work as relying on transactions, total deposits and total withdrawals since Celsius launched the service in 2018.
Chainalysis denied the allegations in its motion to dismiss and sought dismissal of the entire case, while the ruling did not establish that Chainalysis committed the conduct alleged by the complaint.
Next steps for BRIC
The Blockchain Recovery Investment Consortium, or BRIC, brought the lawsuit as litigation administrator and recovery manager for the Celsius estate, and it is pursuing the surviving claim on behalf of Celsius and certain former customers.
The court dismissed 15 Celsius claims against Chainalysis, including 12 consumer-protection claims dismissed with prejudice that cannot be refiled in their current form.
The court allowed three consumer-protection claims to be amended by Oct. 20, and it required an amended complaint by that deadline or a letter confirming the plaintiffs do not plan to amend.
The surviving claim keeps the focus on the use of terms like “audit,” “independent verification” and “third-party verification” in the Dec. 9, 2020 press release, which BRIC alleges were materially misleading.
Chainalysis told Cointelegraph it was unable to comment, and the litigation continues as the estate seeks recovery for creditors after Celsius’ July 2022 bankruptcy filing.