Ripple vs SEC Lawsuit Decision: XRP Court Ruling, Timing, Details in Full

Key Takeaways

• Stuart Alderoty has criticized the recent remarks made by Gary Gensler.
• Alderoty pointed out that the SEC has been suing companies without conducting prior investigations.
• The SEC has faced criticism from the government’s internal auditor for its handling of the Ripple case. 

The ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC) has taken a new turn with the recent remarks made by SEC Chairperson Gary Gensler.

In a speech  at the Securities Enforcement Forum 2023, Gensler referenced the SEC’s role as a protector of investors and a prosecutor of dishonest practices.

Alderoty: Gensler Prejudged Ripple’s Case

Ripple’s Chief Legal Officer, Stuart Alderoty, criticized  the recent Gensler’s remarks who referenced  the wisdom of the inaugural SEC Chair, Joseph P. Kennedy, highlighting the agency’s role as a collaborator with upright enterprises and a prosecutor of dishonest practices.

However, amidst these statements, Gensler also included  several quotes from leaders, with one of the most notable being, “We shall not prejudge, but we shall investigate.” This speech took place at the Securities Enforcement Forum 2023.

Upon the dissemination of Gensler’s speech , Alderoty swiftly responded to the comments. In his reply to the speech, Alderoty explicitly stated that Ripple’s case had been prejudged. Contrary to Gensler’s assertions, Ripple’s Chief Legal Officer seemed to underscore the true nature of the ongoing legal dispute.

“Firstly, Ripple wasn’t charged for ‘Dishonesty,’ and secondly, the case was all ‘prejudged’ with a compromised Hinman’s Bill,” he added.

Hinman, a key figure in shaping the regulatory status of cryptocurrencies, is accused of having a potential conflict of interest due to later affiliations with a law firm involved in the Ripple case.

Expanding on his statement, Alderoty pointed out that the U.S. SEC had sued Ripple and various other firms without conducting prior investigations.

Furthermore, Stuart Alderoty drew attention to the SEC’s recent legal setbacks in a tweet, highlighting the agency’s courtroom losses and the criticism it faces from judges for what is described as “shady behavior.” The government’s internal auditor has joined in the criticism, rebuking the SEC and raising questions about its internal practices.

Ripple And SEC Outline Discovery Roadmap

The ongoing XRP lawsuit, a central focus within the cryptocurrency community, has reached a pivotal juncture under the guidance of Judge Analisa Torres in the Southern District of New York. A prominent attorney closely engaged in overseeing these proceedings has provided a crucial update.

Ripple Labs and the U.S. Securities and Exchange Commission (SEC) have now each submitted their proposed schedules, delineating the roadmap for the settlement phase.

During this phase, encompassing remedies discovery and briefing, a significant legal battle is underway, setting the stage for negotiations that will significantly influence the course of the case. What sets this phase apart is the definition of ‘permissible discovery terms,’ which essentially outlines the boundaries for exploration by both parties.

The recent SEC letter , dated November 9, holds significant importance as it delineates the permissible discovery scope. A mutual agreement acknowledges that permissible discovery should primarily focus on events predating the SEC’s initial complaint against Ripple – a critical aspect for settlement talks.

But what makes this settlement a point of contention?

Pros of Settlement

A potential settlement in the XRP lawsuit carries both advantages and disadvantages. On the positive side, it could bring much-needed clarity to XRP’s status, benefiting the cryptocurrency industry and its investors.

It would also save substantial legal costs by avoiding a protracted trial, enabling more efficient resource allocation. Furthermore, a settlement would remove the cloud of regulatory uncertainty hanging over Ripple, fostering confidence in its operations.

Cons of Settlement

However, settling the case may also have drawbacks. It could set a precedent for future crypto-related legal battles, potentially influencing regulatory approaches.

Additionally, it might miss the opportunity to establish clear industry regulations, leaving lingering ambiguity. Finally, the complex process of agreeing on terms and timing for a settlement could potentially prolong the case’s resolution.

Latest Update

Both Ripple Labs and the SEC have agreed to focus on events preceding the SEC’s complaint. The SEC has requested 90 days for discovery related to remedies, a proposal accepted by Ripple, demonstrating their willingness to cooperate.

However, Ripple retains the right to challenge any discoveries made post-complaint. The SEC has also been granted permission to depose a key witness, Anthony M. Bracco , within the next 90 days.

Brad Garlinghouse, the CEO of Ripple, was pretty outspoken during DC Fintech Week 2023. 

“I think that definitely could happen. […] We’ve said this publicly. We’re in it until the end.”

The Ripple CEO also said  there was a possibility of the Supreme Court and the chances of Supreme Court victory.

“That is a good thing. The current Supreme Court, we’d love to see the Vegas odds on how that would go. They have not been friendly to regulators.”

Discussing the US regulatory landscape, Garlinghouse commented :

“It has become a political liability. The way the SEC has approached this in the United States, we are looked at here in the US, relative to other countries, as stuck.”

What Has Led to This Point?

The battle between Ripple and the SEC has been drawn out over a few years now — however, the ebbs and flows of this case are worth noting as one side and then the other appears to gain the upper hand in certain instances.

The SEC has previously filed an interlocutory appeal in relation to the XRP ruling, which has added to the unfavorable attitude around the price of XRP.

As a result, Ripple had to respond by September 1 and the SEC by September 8 in order to address any additional responses that Ripple may provide.

Notably, Ripple wants to “dramatically reduce” the penalties, while the SEC wants the full $770 million in institutional XRP transactions. Therefore, the outcome of the settlement talks and the ultimate court ruling will determine the exact amount that the blockchain company would have to pay.

Prior to this, attorney John E. Deaton stated  that he believed Ripple would win the case 99.9% of the time if the company settled for $20 million or less.

Meanwhile, attorney Jeremy Hogan clarified that the sum that was “fair” required to include net earnings from the sales rather than gross.

Ripple Wins a Partial Victory

After nearly two years of litigation, Ripple landed a significant win against the SEC. On July 13, U.S. District Judge Analisa Torres declared that Ripple did not violate federal securities law by selling its XRP token on public exchanges.

The announcement  caused a domino effect of positive outcomes. The exchange’s native token saw a huge surge in price, another big exchange had its hope revitalized regarding its own SEC case, and the market may have just changed its perspective on altcoins.

Essentially, the judge ruled that Ripple did not violate the securities law by selling $1.3 billion worth of XRP. Judge Torres decided that Ripple’s XRP sales on public cryptocurrency exchanges were not offers of securities under the law, because they do not offer any guarantees of profit. 

On top of that, Ripple sold XRP in “blind bid/ask transactions,” and therefore, buyers “could not have known if their payments of the money went to Ripple or any other seller of XRP.”

Ripple Vs. SEC – The History

In 2020, the SEC alleged  that Ripple raised over $1 billion in 2013 through the sale of XRP in an unregistered security offering to investors. Ripple then responded XRP is not a security and that the SEC lacked fair notice.

The SEC then responded by requesting the judge for a hearing immediately, and in June 2021,  the court extended the SEC’s deadline for disclosing its internal crypto trading policies.

Ripple Labs defended itself by saying, “XRP does not qualify as an investment contract,” as the company itself never entered any such contract with its investors in the first place. Furthermore, XRP remains outside the SEC’s range since it is a virtual asset.

In a recent interview, the president of Ripple Labs, Monica Long, commented , “Both the facts and the law” are on Ripple’s side.

Ripple Vs. The SEC Timeline

About the Author

Teuta Franjkovic

Teuta is a seasoned writer and editor with more than 15 years of experience. She has expertise in covering macroeconomics and technology as well as the cryptocurrency and blockchain industries. She has worked for several publications as a journalist and editor, including Forbes, Bloomberg, CoinTelegraph, Coin Rivet, CoinSpeaker, VRWorld and Arcane Bear. Teuta began her professional career in 2005, working as a lifestyle writer at Cosmopolitan in Croatia. From there, she branched out to several other publications, covering mainly business and the economy. She then turned her attention to the world of cryptocurrency and blockchain, believing that crypto is among the most important inventions in the history of humanity. Her involvement in fintech began in 2014 and she has since lent her expertise in writing, editing and gathering information about the world of crypto, blockchain, NFTs and Web3. An all-round news hound, mentor, editor, and writer, Teuta enjoys teamwork and good communication. She holds a WSET2 diploma and has a thing for chablis, punkrock music and shoes. She also holds a double MA in Political science and Entrepreneurship.

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