In a recent development, a landmark judgment regarding the status of Ripple’s XRP token as a security is not expected to influence the ongoing bankruptcy proceedings of the beleaguered crypto lender, Celsius. This information was revealed by the legal counsel representing Celsius during a court hearing in New York on Tuesday.
Ripple’s XRP and Celsius’ Institutional Saga
In a landmark ruling with potential repercussions for future cryptocurrency regulations, a judge declared that while XRP itself is not a security, Ripple Labs’ actions were not entirely lawful. The federal judge determined that the XRP cryptocurrency token does not qualify as a security. However, the judge also found that Ripple Labs’ sales of XRP, amounting to $728.9 million, to institutional clients were in fact an unauthorized security offering.
This has attracted the attention of Judge Martin Glenn as he felt some connection between Celsius’ bankruptcy proceedings and XRP’s illegal sales to institutions.
The recent ruling on XRP could potentially influence the repayment to creditors for their holdings of Celsius’ token CEL. This is due to U.S. bankruptcy regulations that necessitate a compulsory downgrade of customer claims related to securities.
Chris Koeing, who is representing Celsius from the law firm Kirkland and Ellis, expressed his belief to the court. He suggested that the Ripple judgment might not have any impact beyond the potential issue with the CEL token. He also added that the new company, which is set to take over, hasn’t been involved in any securities offerings or adopted any of Celsius’ past business practices.
Chris Koenig revealed that the Fahrenheit consortium, the recent victor in the bid for Celsius’ assets, plans to focus on less legally complex matters such as bitcoin mining and Ethereum staking.
Legal Storm Brews for Celsius Leadership
The creditors of the Celsius Network have submitted a document indicating that its Series B stakeholders have agreed to allocate $25 million from the revenue generated from the sale of GK8. This agreement was reached in consensus among the debtors, the creditors’ committee, and the initial consenting Series B preferred holders.
A week ago, Alex Mashinsky, the founder and ex-CEO of Celsius, along with Chief Revenue Officer Roni Cohen-Pavon, faced numerous fraud charges. These charges were brought forward by the Department of Justice and various securities, commodities, and trade regulators.
Simultaneously with Mashinsky’s apprehension, regulators unveiled several agreements with Celsius aimed at preventing any disruption to creditor payouts. Koenig stated that the arrangement Celsius made with the Securities and Exchange Commission would support the regulator’s assertion that both CEL and Celsius’ Earn Interest Account qualify as securities.