A recent court hearing in New York has revealed that the judgment regarding the status of Ripple’s XRP token as a security will not have any impact on the ongoing bankruptcy proceedings of Celsius, a troubled crypto lender. The legal counsel representing Celsius confirmed this information during the hearing.
The judgment on XRP, delivered by a federal judge, has potential implications for future cryptocurrency regulations. The judge ruled that XRP itself is not a security, but found that Ripple Labs’ sales of XRP to institutional clients were unauthorized security offerings, totaling $728.9 million. This has caught the attention of Judge Martin Glenn, who sees a connection between Celsius’ bankruptcy proceedings and XRP’s illegal sales.
The ruling on XRP could potentially affect the repayment to creditors holding Celsius’ token CEL, as U.S. bankruptcy regulations require a downgrade of customer claims related to securities. However, Chris Koenig, representing Celsius, expressed his belief that the Ripple judgment may only have an impact on the CEL token and not beyond. He also mentioned that the new company taking over Celsius’ assets has not engaged in any securities offerings or adopted Celsius’ past business practices.
The Fahrenheit consortium, the winner of the bid for Celsius’ assets, plans to focus on less legally complex matters, such as bitcoin mining and Ethereum staking, according to Koenig.
In another development, the creditors of the Celsius Network have agreed to allocate $25 million from the revenue generated from the sale of GK8, as indicated in a document submitted by the creditors. This agreement was reached among the debtors, the creditors’ committee, and the initial consenting Series B preferred holders.
Last week, Celsius’ founder and ex-CEO, Alex Mashinsky, along with Chief Revenue Officer Roni Cohen-Pavon, faced fraud charges brought by the Department of Justice and various securities, commodities, and trade regulators. Simultaneously, regulators reached agreements with Celsius to ensure there would be no disruption to creditor payouts. Koenig mentioned that Celsius’ arrangement with the Securities and Exchange Commission supports the regulator’s assertion that both CEL and Celsius’ Earn Interest Account are securities.
Overall, these recent developments highlight the legal challenges facing Celsius and the potential impact of the XRP judgment on its bankruptcy proceedings and the repayment to creditors. The involvement of regulatory authorities further complicates the situation for Celsius and its leadership.
