The US Securities and Exchange Commission (SEC) has filed its reply remedies brief against giant FinTech Ripple. The filing is in response to Ripple’s opposition brief against the regulator’s earlier motion for remedies which determined a total penalty of roughly $2 billion for the tech firm. The document reveals that the SEC has not shifted its position regarding its proposed injunctions and financial penalty against Ripple.
The SEC Maintains That The Court Should Apply The Proposed Injunctions Against Ripple
The US Securities Regulator had in its motion for remedies filed in March, proposed a “conduct-based injunction prohibiting Ripple from engaging in any unregistered offering of XRP in ‘Institutional Sales’.” According to the SEC, Ripple presents a risk of future securities law violations, warranting a second proposition of an injunction from “participating in unregistered offerings of crypto asset securities.”
However, in an opposition brief filed last month, Ripple challenged the SEC’s injunctive propositions, asking the regulator to justify its call for an injunction by proving “Ripple will likely violate the law in the future.” Ripple maintained that a mere possibility of future violations isn’t enough to warrant injunctive relief.
In Wednesday’s redacted reply brief, the SEC argues that “the court should enter the requested injunctions,” saying that Ripple’s being found liable for a violation that took place over many years is enough indication of its higher likelihood of repeating the violation.
Ripple’s Arguments Against Disgorgement Are Meritless, Says SEC
The SEC had asked the court to order Ripple to “disgorge the ill-gotten gains it received from its violations,” proposing $876 million as a “reasonable approximation of profits causally connected to the violation.” The SEC also calculated a prejudgement interest of $198 million intended to deprive Ripple of the benefit of holding the illicit gains over time.
Meanwhile, Ripple’s opposition brief claimed a disgorgement is not warranted, since its institutional sales caused “no pecuniary harm” to buyers as the SEC alleged. “The SEC must show that investors suffered pecuniary harm as a predicate for a disgorgement remedy,” said Ripple.
The SEC in its latest filing, has reiterated its position on Ripple’s “pecuniary harm” to investors:
“The SEC has shown that Ripple’s violation—its failure to provide statutorily mandated disclosures about pricing and discounts—caused pecuniary harm because some institutional investors paid more than they would have had they received all required information.”
SEC Maintains Stance on Large Penalty for Ripple
The SEC slammed Ripple with a civil penalty of $876 million—equal to the proposed disgorgement—which the regulator believes suits the “egregiousness of Ripple’s misconduct.”
Ripple replied that its civil penalty “should not exceed $10 million” given that the relevant factors counsel a low penalty and since its case with the SEC is a first-tier case – not involving fraud, deceit, or manipulation accusations.
However, the SEC is convinced that the “low” penalty Ripple demands will be a “slap in the wrist” given the nearly $1 billion it made while violating securities law.
Ruling Expected Between July and September
The SEC vs Ripple case is expected to reach a definitive conclusion this year, with analysts hinting at a ruling between July and September 2024.
“And now we wait for Judge Torres to rule, somewhere between July – September. Or maybe the parties settle before that. Either way, we shall persevere,” wrote Ashley Prosper, a well-informed XRP community member and analyst on X (formerly Twitter).
“Just waiting for the Judge now,” said pro-XRP lawyer Jeremy Hogan who said he’ll “start watching out for a ruling in July” and be shocked if there wasn’t one by September.