A bankruptcy judge recently hesitated to categorize CEL, the native token of Celsius, as a security, due to the legal cat-and-mouse game between Ripple Labs and the US Securities and Exchange Commission (SEC). One notable CEL token holder, Otis Davis, had proposed the judge recognize the Ripple/XRP case’s legal precedent to establish a distinct committee for CEL token holders, a request which was consequently dismissed by Chief US Bankruptcy Judge Martin Glenn. In his notice, the judge maintained that the court’s decision did not constitute a definitive verdict on the nature of crypto tokens as securities as per federal securities laws.
The whirlwind legal dispute between the SEC and Ripple initiated in 2020 when SEC accused Ripple of illicitly accumulating $1.3 billion via XRP sales, labelling it as an unregistered security. Subsequently, a US court ruled that XRP’s sales on exchanges could not be deemed an investment contract last month, a judgment lauded by Ripple. Interestingly, the court also ascertained that direct XRP sales to institutional investors do qualify as securities, thus granting a semi-triumph to the SEC. This judgment has now been invoked in other court cases, including activities concerning Terraform Labs.
However, a more distressing yet grey aspect of the crypto verse was highlighted by Shoba Pillay, a court-appointed examiner, who examined Celsius‘ conduct of CEL tokens. The inspector pointed out that the firm’s business model heavily deviated from what it projected to its consumers. Going a step further, she referred to Celsius as “insolvent since inception” and suggested that CEL was used as a cornerstone of a scheme aimed at empowering the enterprise’s top brass at the customer’s expense.
According to the inspection, Celsius poured in at least $558 million into the open market CEL token purchases, which drove the token prices up by whopping 14,000% since mid-2020. This inflated estimation significantly profited the top executives, including CEO Alex Mashinsky and co-founder Daniel Leon, who allegedly vended CELs worth at least $68.7 million and $9.74 million from 2018 to 2022.
In conclusion, the critical question here remains that while such a rise in the token value bodes well for the company and its shareholders, shouldn’t the ethical considerations of such actions and their implications on customers be pondered upon? But, as this case remains unresolved, it provides ample food for thought. For now, these revelations only cement the importance of clear-cut regulations and transparency in the cryptosphere.