- The SEC has filed its desired fines against Ripple Labs for allegedly selling unregistered securities.
- Ripple has argued that the SEC’s demands are excessive and has proposed a new penalty instead.
- Ripple has provided reasons and a plan of action for how they will address these charges.
The Ripple vs SEC saga continues to heat up. The SEC has doubled down on its claim that Ripple Labs sold unregistered securities in the form of XRP, by requesting nearly $2 billion in penalties against the company. To bolster their case for such hefty fines, the SEC recently submitted new expert materials, including a declaration by an SEC accountant and related exhibits.
In response to this escalation, Ripple has filed a motion to strike the SEC’s new expert materials. They argue that these filings were submitted outside the designated timeframe and violate discovery rules.
Ripple Believes $10 Million Penalty is Enough
The SEC argued that Ripple should pay $1.3 billion in disgorgement, an additional $1.3 billion in civil penalties, and nearly $200 million in prejudgment interest for allegedly selling unregistered securities in the form of XRP.
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Ripple, however, contends that the SEC’s demands are excessive. They argue the court should impose a civil penalty of no more than $10 million. Their reasoning hinges on two key points:
- The SEC failed to demonstrate that Ripple’s institutional XRP sales caused any harm to investors, making disgorgement unwarranted.
- Ripple has already acknowledged the court’s July 2023 ruling and has modified its XRP sales practices to comply.
Further complicating matters for the SEC, two of their lawyers recently resigned following a judge’s sanctions against the Commission in a separate case, citing “gross abuse of power” by the SEC. The timing of these resignations has raised questions about the SEC’s handling of its case against Ripple and comes at a crucial time as the firm files a motion to strike the SEC’s new expert materials.
Ripple Objects to SEC’s Expert Witness
Adding to the intrigue, Ripple’s motion to strike the SEC’s expert materials centers on procedural issues. Ripple argues that the SEC’s filings, including a declaration by an SEC accountant and related exhibits, were submitted outside the designated timeframe and violated discovery rules.
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They claim this constitutes “sandbagging,” a tactic where evidence is withheld until later in the case to gain an unfair advantage. Specifically, Ripple takes issue with the SEC’s characterization of the accountant as a “summary witness” rather than an expert.
Ripple argues that the testimony is substantive and should have been disclosed during the discovery phase. As a result, they urge the court to remove the declaration and any references to it from the SEC’s motion.
What’s Next?
The Ripple vs SEC lawsuit continues to be a war of attrition with both sides exchanging blows. Though there is currently no set timeline for proceedings, here’s a breakdown of what’s on the horizon:
- Legal experts anticipate a ruling from Judge Torres within the next 60 to 90 days.
- The court will decide whether to accept Ripple’s arguments and remove the SEC’s expert materials from consideration.
- The SEC has five business days to respond, followed by a three-day window for Ripple’s rebuttal.
- A settlement remains a possibility. Both sides may eventually find it more advantageous to reach an agreement than to endure a potentially lengthy and expensive trial.
The outcome of this lawsuit has significant implications for the entire cryptocurrency industry. A win for Ripple could provide much-needed clarity on how regulations apply to digital assets. Conversely, a win for the SEC could usher in a period of stricter regulatory oversight for cryptocurrencies.
On the Flipside
- Ripple’s compliance with the court’s July 2023 ruling might not be enough to justify a lower penalty.
- Even if the court removes the SEC’s expert materials, the SEC may have other evidence to support its request for penalties.
Why This Matters
The court’s decision on Ripple’s motion to strike the SEC’s expert witness materials seeks to drastically impact the size of potential penalties for Ripple, setting a precedent for how future crypto-related penalties are determined, and potentially influencing the broader regulatory landscape for the entire cryptocurrency industry as the SEC continues to enter litigation with Web3 firms.
A recent court ruling in the Coinbase case could have implications for the ongoing Ripple vs SEC case. Find out more about it here:
Coinbase’s Ruling May Send Ripple vs SEC Case to Supreme Court
This is an article discussing the upcoming filing deadlines and pre-trial conferences in the legal battle between Ripple and the SEC:
Ripple CLO: “No Pre-Trial Conference” – Is the Case Affected?
