Ripple says SEC lawsuit could end in weeks — don’t hold your breath
The Securities and Exchange Commission (SEC) has been suing Ripple since December 2020, and they are within months of their final battle. The SEC alleged that Ripple and two of its executives raised $1.3 billion in an unregistered securities sale. Ripple has declined settlement offers to date, claiming that they never conducted such a sale.
A judge could rule on the current securities status of XRP as those tokens exist today, but most of the lawsuit specifically relates to Ripple’s initial coin offering (ICO). In other words, whether or not XRP is a security nowadays, the company’s earlier actions, promises, and sales is a separate legal issue.
In a worst-case outcome for the defendants, a judge could order Ripple to pay several billion dollars in treble damages, disgorgement, fines, and interest. Such a sum would permanently bankrupt it, co-founder and chief exec Brad Garlinghouse, and/or executive Chris Larsen.
Ripple and its team remain confident that they will prevail in court.
SEC and Ripple want the judge to end it now
As recently as December 5, the SEC and Ripple submitted final arguments and jointly requested a judge to rule on summary judgment. This would end the lawsuit and avoid a courtroom trial. This display of cooperation made some people believe that a resolution was near but District Judge Analisa Torres has yet to set a date for another hearing.
In the meantime, Garlinghouse has mentioned he expects a decision within the first half of 2023.
Meanwhile, the SEC and Ripple continue to tussle back-and-forth through court filings. According to attorney James Filan, the SEC recently filed a motion to block testimony by Ripple’s expert witnesses.
- Ripple has similarly sought to block testimony from some of the SEC’s expert witnesses.
- On a related issue, the SEC and Ripple have been debating over the anonymity of an “Investment Banker Declarant.”
- The SEC also partially opposed Ripple’s request to seal some documents relating to motions for a summary judgment.
Meanwhile, Ripple’s general counsel Stuart Alderoty has controversially called on Congress to improve its oversight of the SEC, which in his opinion, pursues power at the expense of good policy. Alderoty claimed the SEC doesn’t have the authority to make new laws, nor does it have authority as broad as it claims.
Bill Hinman’s conflicted speech about Ethereum
On September 29, the presiding judge ruled in favor of Ripple’s request for correspondence related to Bill Hinman’s statements on Ethereum. In a previous speech, Hinman opined that Ethereum had become decentralized enough to avoid classification as a security.
Empower Oversight obtained evidence that Hinman had a potential conflict of interest while making that speech. He had a financial stake in Simpson Thacher & Bartlett, a law firm listed as a member of the Enterprise Ethereum Alliance (Empower Oversight had legal experience fighting the SEC to honor its FOIA requests).
Read more: Former SEC director Hinman made millions from a pro-Ethereum firm during tenure
Follow the money: Ripple is still selling XRP
Ripple’s XRP Report for the final quarter of last year indicated that it sold another $226.3 million worth of its native token.
The report claimed that Ripple remained confident a ruling would be made in 2023. According to defense attorney James Filan, a final court date is still pending.
Slightly more than two years ago, the SEC announced its lawsuit against Ripple. It is possible that Ripple declined a settlement in good faith. It is also possible that the settlement amount would have bankrupted the company, giving it little option but to delay by battling in court. Both parties anticipate that the presiding judge could issue summary judgment within the next few months.
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