Judge Cites Ripple Case in Rejecting CEL’s Security Classification in Bankruptcy Proceedings
In a recent bankruptcy proceeding, a federal judge made a ruling in regard to Celularity Inc.’s classification of its debt as a security. The judge cited a previous ruling in the Ripple case when ruling that the debt could not be considered a security. The Ripple case was a 2018 lawsuit in which the Securities and Exchange Commission (SEC) alleged that Ripple had unregistered securities offerings in violation of federal law. The judge in the Celularity case noted that the SEC argued in the Ripple case that the tokens offered by Ripple had the characteristics of a security, including the reasonable expectation of profit by investors. The judge ruled that the same characteristics applied in the Celularity case and that the debt could not be considered a security. The ruling is significant as it shows that courts are increasingly looking to the Ripple case and other earlier legal disputes over digital assets to inform decisions in similar cases.