U.S. SEC Fires Back at Ripple, Seeks Hefty Fines and Injunctions in Ongoing Lawsuit

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As a researcher with a background in finance and securities law, I find the ongoing legal dispute between Ripple and the SEC to be an intriguing and complex case. Having closely followed the developments in this case, I believe that the SEC’s stance on the proposed fines is justifiable based on the potential consequences of setting a low precedent.

The SEC has strongly disputed Ripple‘s proposition for reduced fines in the ongoing XRP token sale controversy. In their latest court document, the SEC asserted that Ripple’s proposed penalty of approximately $10 million would be insignificant, almost equivalent to a light reprimand, contrasting the nearly $2 billion fine the SEC has advocated for.

Since December 2020, the SEC and Ripple have been locked in a legal dispute over the company’s sale of XRP tokens, which the SEC claims was an unregistered securities offering totaling $1.3 billion. On July 13, 2023, Judge Torres of New York passed her ruling. She found that certain programmatic sales of XRP did not infringe upon securities laws due to the presence of a blind bid process. However, she also decided that specific sales of the token to institutional investors were indeed classified as securities.

Last month, Ripple challenged the SEC’s proposed fines in an opposing motion, stating that a penalty of $10 million would be more fitting based on the circumstances. In contrast, the SEC insists that this amount is insufficient and could potentially encourage other crypto asset issuers to disregard securities laws, denying investors the required disclosures as mandated by Congress. The SEC’s legal team emphasized that a low fine would make it an enticing prospect for companies to flout securities regulations.

The SEC raised objections to Ripple’s promises in court that they would abide by the law regarding XRP sales moving forward. Rippe presented their acquired licenses from various regulatory bodies as evidence, with some of these entities not classifying XRP sales as securities transactions. However, the SEC’s legal team disregarded this argument, making a comparison to a New York restaurant that insists it doesn’t require a liquor license because they possess a fishing permit from California.

The SEC contends that Ripple’s assertions of complying with regulations and altering its XRP sales based on the court’s rulings are incorrect. In the SEC’s perspective, Ripple is misconstruing the court’s instructions and not fully grasping their consequences, making the evasion of injunctions unjustifiable.

Yesterday, Ripple’s Chief Legal Officer, Stuart Alderoty, took aim at the Securities and Exchange Commission (SEC) on social media platform X for its management of the ongoing lawsuit against Ripple. He asserted that the SEC had misapplied the law and tried to deceive the court. Alderoty expressed faith that Ripple was approaching the conclusion of this legal dispute, while acknowledging that others were just starting to encounter similar issues. He demonstrated trust in the impartiality of the upcoming remedies phase. Moreover, Alderoty fiercely criticized the SEC’s respect for international financial regulators, implying that the SEC disregards the accomplishments of those who have developed elaborate cryptocurrency licensing systems, likening them to insignificant fishing permits.

If you’re a financial regulatory body outside the US and have put in great effort to create extensive crypto licensing systems, be aware that the SEC holds a dismissive attitude towards your efforts and believes you are issuing licenses similar to…

— Stuart Alderoty (@s_alderoty) May 7, 2024

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2024-05-09 12:23