Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York has firmly rejected the request made by stakeholders to establish a special shareholders class within the Celsius Network bankruptcy case. This decision was outlined in a court document filed on August 25, marking a significant turning point in the ongoing legal proceedings.
Refusal to Declare CEL Token “Not a Security” and Court Hearing
Despite existing precedents set by the SEC v. Ripple case, Judge Glenn also declined the petition to categorize the CEL token as “not a security.” This refusal to make such a declaration adds a layer of complexity to the legal landscape surrounding the Celsius Network’s token.
The origins of this development trace back to a motion initiated by investor Otis Davis, who submitted the motion on July 25. The motion was subsequently brought before the court during a hearing held on August 14.
Davis aimed to establish a distinct legal class for investors, separate from both Celsius Network employees and customers. This class would ensure focused representation and consideration for the unique concerns of investors.
Sanctioning of Legal Team and Request for Disclosure
Furthermore, Davis sought the court’s intervention to impose sanctions on the legal team representing the Unsecured Creditors Committee (UCC). The basis for this request was the alleged failure to provide necessary and required information to stakeholders. Davis’s motion emphasized the importance of transparency and full disclosure during these legal proceedings.
Drawing from recent developments in the U.S. Securities and Exchange Commission (SEC) v. Ripple case, Davis’s motion also included a plea to declare the CEL token as “not a security.” This request was underpinned by Judge Analisa Torres’s determination in the Ripple case that XRP was not a security.
It’s important to note that this determination applied specifically to programmatic sales on digital asset exchanges. However, Judge Torres ruled differently when it came to XRP sales involving institutional investors.
Judge Glenn’s Swift Response and Final Decision
Judge Martin Glenn’s response to these motions was prompt and decisive. Just eleven days after the arguments presented during the August 14 hearing, he issued a ruling dismissing all three motions. Furthermore, Judge Glenn clarified that his decision did not entail any definitive verdict regarding the classification of crypto tokens or transactions involving them as securities.
Celsius Network’s Background and Recent Developments
The Celsius Network’s journey through bankruptcy began on July 14, 2022. Remarkably, within a year, the company’s former CEO, Alex Mashinsky, faced legal consequences as he was arrested and charged with fraud.
Since these events unfolded, Celsius has engaged in a series of settlements, aiming to bring relief to both customers and investor groups. The most recent round of settlements is scheduled for a hearing in October, reflecting the ongoing efforts to resolve the complexities arising from the company’s bankruptcy and subsequent legal proceedings.
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