As an analyst with a background in securities law, I’ve closely followed the legal battle between Ripple and the SEC throughout 2023. The ongoing case has been intriguing due to its potential implications on the crypto industry as a whole.
TL;DR
- Ripple has achieved significant partial legal victories in its ongoing battle with the SEC throughout 2023.
- The potential penalty remains disputed, with the SEC proposing $102.6 million and the company arguing for a maximum of $10 million.
Filing After Filing
The ongoing dispute between Ripple and the US Securities and Exchange Commission (SEC) remains a captivating issue within the cryptocurrency community. This confrontation can be traced back to December 2020, when the regulatory body filed a lawsuit against the company for allegedly raising over $1.3 billion through unregistered securities offerings by selling XRP.
In the ensuing years, there were numerous exchanges of gunfire between the parties with the advantage shifting back and forth. As reported by certain insiders in the industry, Ripple now holds a strategic edge following its achievement of three significant (albeit incomplete) court victories.
Last July, Judge Torres determined that the company’s programmatic sales of XRP to secondary trading platforms did not equate to propositions of investment contracts. This judgement was then met by a significant surge in XRP’s value, which soared by more than 70% within just one day.
The magistrates refused the SEC’s plan to challenge the decision, exonerating Ripple’s CEO Brad Garlinghouse and Executive Chairman Chris Larsen from all allegations made by the SEC.
The case commenced its trial stage in April this year, yet instead of reaching a definitive settlement, it presented further conflict. Notably, Ripple referred to Judge Amy Jackson’s ruling dismissing the SEC’s allegations that secondary market transactions of Binance‘s BNB token equated to securities deals.
The business submitted a Notice of Supplemental Authority to reinforce its position. In this document, it argued that the court’s decision lends support to its claim that the suspected XRP sales should not result in severe penalties.
The Commission was quick to react, filing an official response on July 3. It maintained that the case against Binance is “wholly irrelevant” to the one against Ripple.
The Possible Penalty
The proposed fine for Ripple in the ongoing lawsuit is another contentious issue between the two parties. The SEC originally demanded a substantial penalty of $2 billion, while Ripple maintains that the amount should not exceed $10 million.
Ripple made a comparison between the ongoing legal action and the previous case involving the regulatory body and Terraform Labs. The former lawsuit contains more explicit accusations of fraud, which were primarily aimed at Terraform Labs, a now-defunct crypto firm.
Shortly after, the SEC softened its tone, proposing a $102.6 million penalty:
Ripple’s penalty for violating regulations with Terraform settlement is not based on the difference between the penalty amount and the gross profits of the infringing conduct. Instead, this ratio amounts to 11.7% (or $420 million out of $3.587 billion). Applying this percentage to Ripple’s reported gross profits ($876.3 million) results in a much more substantial penalty – approximately $102.6 million – that the SEC proposes, compared to Ripple’s proposed ceiling of $10 million.
Is a Resolution Incoming?
Despite the imminence of a decision in this case, the final resolution may be delayed indefinitely because of the intricacy of the legal proceedings and potential appeals from both parties.
Some optimists hold the view that a deal might be reached within the upcoming weeks. For instance, the American lawyer Fred Rispoli has proposed July 31st as a potential date. He anticipates that such an agreement will involve a fine of up to $25 million for Ripple and no requirement for disgorgement.
“In my analysis of the judge’s ruling, all sales that she considered illegal have been permanently prohibited. However, the contracts referred to as ‘new’ by Ripple were not presented properly before the court, hence the SEC must file another lawsuit if they believe these contracts violate the judge’s decision.”
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2024-07-11 08:40