Bankruptcy judge skirts classifying CEL as a security in light of motion citing Ripple

A bankruptcy judge declined to say whether Celsius' native token is a security in light of the ongoing Ripple Labs case, according to a recent court filing. 

Investor Otis Davis asked for the U.S. Bankruptcy Court for the Southern District of New York to "recognize the legal precedent that has been set in the Ripple/XRP case," as part of a move to create a new separate committee of CEL token holders. 

Chief U.S. Bankruptcy Judge Martin Glenn denied that motion on Friday, among others. Celsius began bankruptcy proceedings last year.  

“... nothing in the Motions, this Order, or announced at the Hearing constitutes a finding under the federal securities laws as to whether crypto tokens or transactions involving crypto tokens are securities, and the right of the United States Securities and Exchange Commission and the Committee to challenge transactions involving crypto tokens on any basis is expressly reserved," Glenn said. 

The SEC has been in a legal fight with Ripple since 2020 when the agency accused it of raising $1.3 billion in 2020 through the sale of XRP, which it says is an unregistered security. 

Judge Analisa Torres of the U.S. District Court for the Southern District of New York ruled last month that some of Ripple’s sales, called programmatic, of XRP did not violate securities laws because of a blind bid process in place for them, which the crypto industry saw as a win. She also ruled that other direct sales of the token to institutional investors were securities, leaving a partial win for the SEC.

Since then, the case has been brought up in other court rooms, including in a separate case involving Terraform Labs last month where a federal judge rejected an argument that Ripple’s split decision invalidated part, or all of, the SEC’s case against Terraform. 

CEL controversy

Earlier this year, a court ordered bankruptcy report found that Celsius used a strategy that would sell CEL tokens in private, over-the-counter transactions and make offsetting purchases in the public market, which it believed would impact the trading price of the token. 

The examiner in that report also accused former Celsius CEO Alex Mashinsky of selling CEL tokens while telling the public that he was either buying more or holding.