In a recent development, a landmark judgment regarding the status of Ripple’s XRP token as security is unlikely to influence the ongoing bankruptcy proceedings of embattled crypto lender Celsius. This information was revealed by legal counsel representing Celsius during a court hearing in New York on Tuesday.
Ripple’s XRP and the Institutional Celsius Saga
In a landmark decision with potential implications for future cryptocurrency regulations, a judge said that while XRP itself is not a security, Ripple Labs’ actions were not entirely legal. The federal judge determined that the XRP cryptocurrency token did not qualify as a security. However, the judge also found that Ripple Labs’ $728.9 million sales of XRP to institutional clients was in fact an unauthorized security offering.
This caught the attention of Judge Martin Glenn as he felt a connection between Celsius’ bankruptcy proceedings and illegal sales of XRP to institutions.
The recent XRP decision could potentially influence the repayment to creditors of their Celsius CEL token holdings. This is due to US bankruptcy regulations that require a mandatory downgrade of securities-related customer claims.
Chris Koeing, who represents Celsius of law firm Kirkland and Ellis, expressed his belief in court. He suggested that the Ripple ruling might have no impact beyond the potential issue with the CEL token. He also added that the new company, which is set to take over, has not been involved in any securities offerings or adopted any of Celsius’ past business practices.
Chris Koenig revealed that the Fahrenheit Consortium, the recent winner of the bid for Celsius’s assets, plans to focus on less legally complex matters such as bitcoin mining and Ethereum staking.
A legal storm is brewing for Celsius leadership
Celsius Network’s creditors have submitted a document stating that its Series B stakeholders have agreed to allocate $25 million from the revenue generated from the sale of GK8. This agreement was reached by consensus between the Debtors, the Creditors’ Committee and the initial consenting Series B Preferred Holders.
A week ago, Alex Mashinsky, the founder and former CEO of Celsius, as well as Chief Revenue Officer Roni Cohen-Pavon, faced numerous charges of fraud. These charges have been brought 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 interruption in creditor payments. Koenig said Celsius’ arrangement with the Securities and Exchange Commission would support the regulator’s assertion that CEL and Celsius’ interest account are considered securities.