Friday started with a notable occurrence: the arrest and charging of Alex Mashinsky, former CEO of Celsius Network, a crypto lending platform that is now bankrupt. Mashinsky was charged with fraud, indicating that he is accused of engaging in fraudulent activities.
On Thursday, the United States Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Federal Trade Commission all filed lawsuits against both Mashinsky and Celsius itself in a flurry of activity related to the enforcement of laws and regulations.
Mashinsky was accused of, among other things, committing fraud and artificially inflating the price of CEL, the native token of the lender. Mashinsky has entered a not guilty plea and will be released on bail, provided he posts a personal recognizance bond in the amount of $40 million.
Celsius and Mashinsky
In the case of the SEC v. Ripple Labs Inc., a judge made a decision that caused a lot of excitement in the cryptocurrency community and caused token prices to go up. Judge Analisa Torres of the US District Court stated that the Ripple Labs token known as XRP, which is at the center of the case, should be considered a security when it is sold to institutional investors but should not be considered a security when it is sold to the general public.
According to the judge’s decision, institutional investors should have been aware that Ripple was promoting XRP as having a value that was based on speculation, and that any profits would depend on Ripple’s ability to run a successful business and manage its operations. This distinction in how the judge views XRP’s status as a security has significant implications for how the cryptocurrency ought to be regulated and how it ought to be made available to various categories of investors.
Publicly Traded Ripple Tokens Are Not Securities, Says Judge
The classification of XRP as a security, according to Judge Torres, applies to institutional investors but not to the general public. She determined that there was no evidence to suggest that the general public could fully comprehend Ripple’s statements about XRP, and some of the SEC’s statements may not have been accessible to the general public.
Whether cryptocurrencies are securities has been a major question hanging over the industry, which has long fought efforts to regulate it by arguing that the tokens do not meet the necessary criteria.
XRP almost doubled, soaring to as much as 94 US cents on Thursday before easing back to 78 cents as of 1:20 p.m. on Friday in Singapore. An offshoot of XRP, Stellar’s XLM, also surged.
In addition to XRP, the SEC (Securities and Exchange Commission) previously categorized multiple tokens as unregistered securities. Despite this classification, the price of these tokens increased after the recent ruling.
Solana has increased by roughly 30% since the ruling, while Cardano has increased by 25%. Bitcoin also increased by 3%, approaching its highest level since June 2022. Additionally, Ether’s price surpassed $2,000, representing a significant milestone. The statement emphasizes the positive price movements of these tokens despite their former regulatory classification.
Ripple Case Decision and Cryptocurrency Regulation
According to Arthur G. Jakoby, co-chair for Securities Litigation and Enforcement at Herrick Feinstein LLP, Judge Torres’ decision in the Ripple case is a major victory for the cryptocurrency and digital asset industry. Jakoby argues that if the decision is upheld on appeal, the Securities and Exchange Commission’s (SEC) authority over the cryptocurrency market would be significantly curtailed. The statement emphasizes, in essence, the potential implications of Judge Torres’ decision on the SEC’s regulatory authority in relation to cryptocurrencies.
The share price of Coinbase Global Inc., a prominent cryptocurrency exchange, increased significantly, marking its largest gain since going public. As of Thursday’s market close, each Coinbase share was worth $107.
Coinbase is involved in a lawsuit with the SEC, which alleges that the company sold unregistered securities. In response to this allegation, Elliott Stein, a senior litigation analyst at Bloomberg Intelligence, explains that the recent price increase strengthens Coinbase’s case against the SEC. Coinbase argues that direct sales of digital assets by the issuer should be categorized as securities, whereas sales on the secondary market, such as trading between individual investors, should not be classified as securities. This distinction is a crucial component of Coinbase’s legal defense strategy.
MicroStrategy, a business intelligence company with significant Bitcoin holdings, saw its stock price increase by 11.7%. In addition, the closing price of Marathon Digital, a cryptocurrency mining company, was over 14% higher on the given day.
Daniel Tramel Stabile, a partner at the law firm Winston & Strawn, views the court’s decision regarding the digital asset industry positively. Stabile notes that the court has explicitly determined that XRP, the token associated with Ripple, is not a security. Instead, the focus should be on the particular circumstances surrounding the token’s issuance. This interpretation emphasizes the significance of evaluating the context and particulars of the token sale when determining whether it is a security.
In December 2020, the Securities and Exchange Commission (SEC) filed a lawsuit against San Francisco-based Ripple and its top executives. The regulator alleged that Ripple, Christian Larsen, and Brad Garlinghouse misled XRP investors by selling over $1 billion worth of tokens without proper registration. The SEC asserted that this action deprived investors of crucial information regarding both the cryptocurrency and Ripple’s business operations.
Cryptocurrencies had been experiencing a significant and rapid increase in value. This is indicative of a broader trend of strong performance and favorable market sentiment in the cryptocurrency market.
There have been numerous exchange-traded fund (ETF) filings for spot Bitcoin in the United States. This surge in filings is largely attributable to an application from BlackRock Inc., a prominent financial institution, and has revitalized traders who faced difficulties during the “crypto winter” – a prolonged period of decline and stagnation in the cryptocurrency market.
It is noted that Bitcoin’s value increased significantly in 2023, rising by approximately 90%. This is a turnaround from the sharp decline it experienced in the previous year, which was exacerbated by various industry scandals and bankruptcies, including Alex Mashinsky’s Celsius. However, it is noted that Bitcoin’s current value is still significantly lower than its 2021 all-time high of nearly $69,000.