The Decline of Celsius’ Native Token and the Ripple Labs Case
A bankruptcy judge recently denied a motion to determine whether Celsius’ native token, CEL, is a security. The motion was filed in the U.S. Bankruptcy Court for the Southern District of New York by investor Otis Davis, who wanted to create a separate committee for CEL token holders based on the legal precedent set by the ongoing Ripple Labs case. Chief U.S. Bankruptcy Judge Martin Glenn denied the motion, stating that it does not constitute a finding under federal securities laws.
The Ripple Labs Case and SEC’s Fight
- The SEC has been in a legal battle with Ripple since 2020, accusing the company of raising $1.3 billion through the sale of XRP, an unregistered security.
- Judge Analisa Torres ruled that some of Ripple’s sales of XRP did not violate securities laws due to a blind bid process, but other direct sales to institutional investors were considered securities.
- The Ripple case has been referenced in other court cases, including one involving Terraform Labs, where a federal judge rejected the argument that Ripple’s outcome invalidated the SEC’s case against Terraform.
The CEL Controversy
An earlier court-ordered bankruptcy report revealed that Celsius engaged in a strategy involving private over-the-counter transactions of CEL tokens and offsetting purchases in the public market, potentially impacting the token’s trading price. The report also accused former Celsius CEO Alex Mashinsky of selling CEL tokens while misleading the public about his own actions.
Hot Take
The denial of the motion to determine CEL’s security status adds to the ongoing uncertainty surrounding cryptocurrency regulations. The Ripple Labs case continues to shape the legal landscape for digital assets, and its implications extend beyond Ripple itself. As more courts reference the case, it underscores the need for clarity and consistency in defining the regulatory status of various tokens. The CEL controversy further highlights the importance of transparency and ethical practices within the crypto industry.
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