In a recent development, a landmark judgment on the status of Ripple’s XRP token as a security is not expected to influence the ongoing bankruptcy proceedings of embattled cryptocurrency lender Celsius. This information was disclosed 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 legal. The federal judge determined that the XRP cryptocurrency token does not qualify as a security. However, the judge also found that Ripple Labs’ XRP sales, in the amount of $728.9 million, to institutional clients were, in fact, an unauthorized security offering.
This drew the attention of Judge Martin Glenn, as he felt some connection between the Celsius bankruptcy proceedings and the illegal sales of XRP to institutions.
The recent ruling on XRP could potentially influence the payment to creditors for their CEL Celsius token holdings. This is due to US bankruptcy rules that require a mandatory write-off of clients’ securities-related claims.
Chris Koeing, who represents Celsius from the law firm Kirkland and Ellis, expressed his belief in court. He suggested that the Ripple trial might not have any impact beyond the potential issue with the CEL token. He also added that the new company, which he will take over, has not been involved in any stock offerings or adopted any of Celsius’ previous business practices.
Chris Koenig revealed that the Fahrenheit Consortium, the recent winner of the bid for the Celsius assets, plans to focus on less legally complex issues, such as bitcoin mining and Ethereum staking.
Legal storm brews for Celsius leadership
Celsius Network’s creditors have filed a document stating that its Series B stakeholders have agreed to allocate $25 million of the proceeds generated from the sale of GK8. This agreement was reached by consensus between the debtors, the creditors’ committee and the preferred holders of Series B who initially consented.
A week ago, Alex Mashinsky, the founder and former CEO of Celsius, along with chief revenue officer Roni Cohen-Pavon, faced numerous fraud charges. These charges were brought by the Department of Justice and various securities, commodities and trading regulators.
Simultaneously with Mashinsky’s apprehension, regulators unveiled several agreements with Celsius aimed at preventing any interruption in creditor payments. Koenig stated that the agreement Celsius made with the Securities and Exchange Commission would support the regulator’s assertion that both CEL and the Celsius Earned Interest Account qualify as securities.
This post XRP Security Verdict Unlikely To Affect Celsius Bankruptcy Proceedings: Legal Information Revealed
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