Judge Martin Glenn has rejected the request to establish a special shareholders class in the Celsius Network bankruptcy case, as stated in a court document filed on August 25th. The motion, put forth by investor Otis Davis on July 25th, sought to create a legal class for investors separate from Celsius Network employees and customers.
Additionally, Otis Davis requested that the court sanction the Unsecured Creditors Committee (UCC) legal team for their alleged failure to disclose required information. The motion aimed to hold the UCC legal team accountable for their actions and ensure transparency throughout the bankruptcy proceedings.
Davis also urged the court to declare CEL as “not a security” based on the recent decision in the SEC v. Ripple case. Citing Judge Analisa Torres’ ruling that XRP was not a security, Davis argued that CEL should be treated in a similar manner. However, it is crucial to note that Judge Torres’ ruling in the XRP case distinguished the security status of XRP based on its sale context.
Judge Martin Glenn swiftly denied all three motions presented by Otis Davis in an order issued just 11 days after the August 14th hearing. The judge stood firm and maintained that his decision did not constitute an official finding on whether crypto tokens, including CEL, should be considered securities. He explicitly stated that the right of the SEC and the Committee to challenge token transactions on any basis remains intact.
The Celsius Network bankruptcy ensued on July 14th, 2022, when the company’s financial struggles came to a head. Notably, just one year later, the former CEO of Celsius Network, Alex Mashinsky, was arrested and charged with fraud, further exacerbating the complex situation.
Since the bankruptcy filing, Celsius has worked toward reaching settlements to provide relief to its customers and investor groups. These efforts aim to address the financial losses suffered by stakeholders, with the latest round of settlements scheduled for a hearing in October.
Judge Martin Glenn’s denial of the requests for a shareholders class and the declaration of CEL as “not a security” demonstrated his careful consideration of the arguments put forth by Otis Davis. While the Celsius Network bankruptcy case continues to evolve, the judge’s decision ensures that the SEC and the Committee retain their authority to challenge crypto token transactions. As stakeholders eagerly await the upcoming settlement hearing, the resolution to the Celsius Network bankruptcy remains on the horizon.