NEW YORK: Bitcoin and other cryptocurrencies rose in value on Friday after the US Securities and Exchange Commission was handed a setback in its legal campaign against the hard-hit sector. The increases came after a federal judge in Manhattan partially dismissed the SEC’s case against the creators of the XRP cryptocurrency, Ripple Labs, who were accused of marketing their currency without first registering it with the Wall Street regulator. The SEC has argued for years that certain digital currencies are financial securities, like stocks or bonds, and are therefore subject to its supervision as an investment product.
The crypto community rejects the argument bitterly and has struggled to withstand the increased scrutiny as well as a string of scandals and arrests of top figures in the sector. “There are still questions about how this applies to other tokens and whether the ruling will hold up, but for now, it’s a huge win for the industry,” said a note from financial advisor The Motley Fool. In a second day of gains, Ethereum was up 5.69 percent in the past 24 hours and Elon Musk-supported Dogecoin was up more than 7 percent. Bitcoin, the main asset in the crypto space, was up 2.3 percent over the past 24 hours, Judge Analisa Torres ruled that this argument could not be upheld for individuals who bought XRP, although she agreed with the SEC regarding institutional investors.
This ruling is a slap in the face for the SEC, which has changed tack in recent months and taken the world’s largest cryptocurrency exchange platform, Binance, and the leading US player, Coinbase, to court. Since 2020, a dozen industry participants have been targeted by the regulator, determined to clean up what the body’s chairman, Gary Gensler, describes as the “wild west”. The SEC’s critics, including members of US Congress, accuse it of trying to impose an old and inappropriate regulatory framework on a new technology. Coinbase gained nearly 25 percent over the session on Wall Street on Thursday though it dipped slightly on Friday.
In another development, US prosecutors arrested the former head of Celsius Network on fraud charges, a year after the cryptocurrency platform filed for bankruptcy protection while owing investors $4.7 billion. A Justice Department indictment of Alexander Mashinsky listed seven criminal counts, including securities fraud, wire fraud and market manipulation. Mashinsky is accused of “orchestrating a scheme to defraud customers of Celsius through a series of false claims about the fundamental safety and security of the Celsius platform,” said US Attorney Damian Williams of the southern district of New York state. “Whether it’s old-school fraud or some new-school crypto scheme, it doesn’t matter one bit
. It’s all fraud to us,” Williams said in a press release. “And we’ll be here to catch it.” Mashinksy, who was born in Ukraine before living in Israel and then the United States, faces decades of potential imprisonment, with each of the seven counts holding a maximum possible sentence of between five and 20 years. Mashinsky was arrested early Thursday and scheduled to be presented in court later in the day. Authorities also charged Roni Cohen-Pavon, Celsius’s former chief revenue officer, who is an Israeli citizen and is currently abroad. At its peak in late 2021, Celsius had more than one million clients and held more than $25 billion in assets. But the company hit hard times in the spring of 2022 as the value of cryptocurrencies plummeted.
Facing deep customer withdrawals, Celsius on June 12, 2022 froze customer accounts before filing for bankruptcy protection a month later. DOJ noted that in the days ahead of the June 2022 freeze on withdrawals, Mashinsky “continued to assure Celsius customers that Celsius was in a strong financial position and had sufficient liquidity to meet all customer withdrawal demands,” according to an agency press release. But even as he made these statements, Mashinsky had removed approximately $8 million of his own assets from the Celsius platform, the DOJ said.
In a parallel case, the Federal Trade Commission announced a settlement with Celsius that will permanently ban it from handling customer assets. Celsius also agreed to a judgment of $4.7 billion, which will be suspended to allow Celsius to return its remaining assets to consumers in bankruptcy proceedings, the FTC said. The agency did not settle with Mashinksy and two other Celsius co-founders, Shlomi Daniel Leon and Hanoch Goldstein. A civil FTC case against these three will proceed in federal court, the FTC said.- AFP
