Analyzing SEC’s Approach in XRP Lawsuit: Ripple vs SEC
Renowned crypto influencer ‘MetaLawMan,’ who recently had an active presence on Twitter, has shed light on the Securities and Exchange Commission’s (SEC) case against Ripple. In particular, he focused on the SEC’s recent filing regarding damages and disgorgement. MetaLawMan expressed his assertion that the SEC has not convincingly contributed anything to the discussion on victims or why disgorgement should be the preferred remedy.
According to MetaLawMan, the SEC primarily relies on one district court case, SEC v iFresh, which established that the “pecuniary harm” requirement is met when a stockholder’s investment is artificially inflated. This is the SEC’s perspective. It argues that institutional buyers who purchased XRP at a lower discount than others suffered from an inflated price, which indicates pecuniary harm. However, MetaLawMan expressed doubt about the accurate interpretation of the facts in this case, stating that it was a misinterpretation of the Second Circuit’s statement in SEC v. Govil.
“The SEC’s reliance on iFresh as precedent for establishing pecuniary harm raises concerns,” MetaLawMan noted. He pointed out that the judge who authored the iFresh decision designated it as “NOT FOR ELECTRONIC OR PRINT PUBLICATION.” He further commented, “Citing a decision with a ‘not for publication’ designation used to be improper. It’s the weakest possible authority for anything.”
The SEC’s Justification for Disgorgement
In its complaint against Ripple for violating securities laws, the SEC outlines why the court should issue an injunction and a disgorgement order. The SEC argues that the injunction would be reasonable to prevent further violations since Ripple’s primary business is still the sale of unregistered XRP tokens. The SEC claims that Ripple’s recently formed business structure may be linked to future violations as it plans to release more unregistered crypto assets.
The court filing highlights that “Ripple has strong incentives to sell XRP even if doing so violates the law.” It further states, “The fact that it has increased On-Demand Liquidity sales, even after the SEC sued it over those sales, demonstrates this.” The SEC’s request for injunctive relief is based on this reasoning, along with Ripple’s refusal to admit wrongdoing and its perceived deflection of blame.
The SEC’s filing also argues that Ripple’s claim of no pecuniary harm to investors is inconsistent. The SEC states, “Pecuniary harm can occur when disclosure failures lead to inflated prices.” It further contends that even if investors made a profit by buying and selling XRP, they still suffered pecuniary loss due to the artificially inflated price resulting from the lack of proper disclosure.
Likelihood of Injunctive Relief and Disgorgement
MetaLawMan acknowledges that the court may follow the iFresh precedent and find that institutional investors of Ripple suffered pecuniary harm, but he deems it unlikely. He points out the SEC’s inconsistency in relying on a non-binding case to prove its argument while justifying its disgorgement request without concrete evidence.
However, despite MetaLawMan’s criticism of the SEC’s approach, the court filing reveals that the SEC’s objective is to prevent future violations through injunctive relief and the imposition of fines and penalties that serve as punishment and deterrence. The SEC emphasizes its determination to hold Ripple accountable for its actions and its failure to provide proper disclosure practices during its business transactions.
Ultimately, the outcome of this case holds significant importance for the crypto world in terms of the SEC’s regulatory approach. The crypto community and legal experts are closely monitoring the SEC’s actions in this matter.
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Ripple vs SEC Lawsuit Nears Conclusion: Who Will Win? Experts Weigh In
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Ripple (XRP)