Ripple court ruling won’t affect Celsius wind-up, says crypto lender’s counsel.

Ripple court ruling won't affect Celsius wind-up, says crypto lender's counsel.

The Ripple-XRP Security Ruling and its Potential Impact on Celsius

The recent landmark judgment regarding the status of the XRP token has sparked concerns about its potential impact on the bankruptcy proceedings of Celsius, a crypto lender. The court ruled that XRP constituted a security when offered to institutional buyers like hedge funds. This ruling has attracted the attention of Judge Martin Glenn, who is overseeing the bankruptcy proceedings of Celsius. However, the counsel representing Celsius, Chris Koenig of law firm Kirkland and Ellis, believes that the Ripple judgment will not significantly affect the wind-up plans of the bankrupt crypto lender.

Celsius’ Transition and Focus on Less Contentious Issues

The Fahrenheit consortium, which recently won the bid for Celsius’ assets, is expected to focus on less legally contentious issues, such as bitcoin mining and Ethereum staking. Koenig assured the court that the new company set to take over is not engaged in any securities offerings and does not plan to continue Celsius’ historic business practices. Therefore, the XRP ruling is unlikely to have a direct impact on the transition and future operations of Celsius.

Potential Impact on Creditor Repayments

The XRP ruling, however, could potentially affect creditor repayments, particularly for holdings of Celsius’ token CEL. Under U.S. bankruptcy rules, customer claims related to securities are subject to mandatory downgrades. The estate has previously valued the CEL token at $0.20, but its value could potentially fall to zero due to the ruling. Some creditors argue that it should be valued at $0.81, which was its apparent price at the time of the bankruptcy in July 2022. The final valuation of CEL will have significant implications for creditor repayments.

Last week, Celsius’ founder and former CEO, Alex Mashinsky, along with Chief Revenue Officer Roni Cohen-Pavon, were charged with multiple fraud counts by various regulatory bodies, including the Department of Justice and securities, commodities, and trade regulators. Mashinsky has pleaded not guilty, and his lawyers have described the charges as “baseless.” In response to Cohen-Pavon’s indictment, a special committee of Celsius’ board authorized his termination, pending a hearing required by Israeli law. Koenig mentioned that Cohen-Pavon did not have significant authority over Celsius’ day-to-day operations even before this process began.

Regulatory Stipulations and Impact on Creditor Distributions

In an effort to avoid any negative impact on creditor distributions, regulators have entered into various agreements with Celsius. One such stipulation is with the Securities and Exchange Commission, which reinforces the regulator’s assertion that CEL and Celsius’ Earn Interest Account are securities. These regulatory actions are aimed at safeguarding the interests of creditors and ensuring a fair and transparent resolution of Celsius’ bankruptcy.

In conclusion, while the Ripple-XRP security ruling has raised concerns about its potential impact on Celsius’ bankruptcy proceedings and creditor repayments, the counsel representing Celsius believes that the ruling will not significantly affect the wind-up plans of the bankrupt crypto lender. The transition to the new company, the focus on less contentious issues, and the ongoing regulatory stipulations aim to ensure a smooth resolution of Celsius’ bankruptcy, while the legal troubles faced by Celsius’ former executives are being addressed through the appropriate legal processes.

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