Ripple asks SEC to establish likelihood of future violations, addresses request for $2 billion in penalties
- Ripple filed its response to the SEC lawsuit on Monday, arguing that XRP institutional sales before and after the court ruling show no disregard for the law.
- The firm asks for a civil penalty of no more than $10 million against the $2 billion requested by the SEC.
- XRP rallied to a high of $0.55 on Tuesday, up nearly 7% from Monday’s low.
Ripple (XRP) climbed to a high of $0.55 on Tuesday following the publication of its response to the allegations from the US Securities and Exchange Commission (SEC). In its filing, Ripple addressed the SEC’s request for $2 billion in penalties and remedies-related opening brief, dismissing most of the claims from the US regulator and asking the judge to impose the firm a penalty of no more than $10 million.
XRP holders have awaited Ripple’s response to the SEC throughout April, with the altcoin gaining nearly 7% from Monday’s low of $0.52.
Daily digest market movers: Ripple response to SEC made public
- Ripple filed its response to the SEC remedies-related opening brief on Monday. The briefing largely denies the US regulator’s accusations.
- Ripple has argued that the SEC had no allegations or findings of recklessness or fraud. The firm asks the SEC for evidence, or positive proof, to establish the likelihood of future violations, and states that “Ripple has changed the way it sells XRP and changed its contracts to avoid any future violation.”
- The court filing also shows that Ripple defends itself against on-demand liquidity buyers requiring protection. The firm states that the regulator has failed to show that any institutional buyers faced pecuniary loss because Ripple did not register with the SEC.
- The filing also outlines Ripple’s total revenue and income coming from institutional sales of XRP.
- The payment remittance firm argued that any civil penalty imposed on Ripple should not exceed $10 million and says that the regulator’s ask exceeds more than 20 times what it has obtained from any other defendant in digital-asset-related cases.
- Ripple says that the SEC regularly imposes far smaller fines to deter misconduct by the largest corporations in the world, citing a $6 million fine imposed on Goldman Sachs, $7 million against Citadel and $6 million against Merill Lynch. “Ripple’s conduct is not recurrent in a sense that would call for a larger penalty,” the firm says.
- Ripple’s Chief Legal Officer (CLO) Stuart Alderoty acknowledged that the firm’s opposition to the SEC’s request for $2 billion in penalties for legacy institutional sales is public.
Our opposition to the SEC’s request for $2B in penalties for legacy institutional sales is now public. In a case that had no allegations (or findings) of recklessness or fraud, and in which Ripple won on significant issues, the SEC’s ask is just more evidence of its ongoing… https://t.co/GLcdsyInZW
— Stuart Alderoty (@s_alderoty) April 23, 2024
- In conclusion, Ripple’s filing reads:
The Court should deny the SEC’s request for an injunction, for disgorgement and for pre-judgement interest, and should impose a civil penalty of no more than $10 million.
- Another key development in the lawsuit is Ripple’s motion to strike new expert materials that the US financial regulator submitted in support of its remedies-related filing.
- Ripple files motion to strike new expert materials
Technical analysis: XRP could post 8% gains on this condition
XRP climbed to a high of $0.55 on Tuesday, extending an upward trend that started on April 14. The next key resistance is the psychologically important $0.60 level. Once above there, the next target is the April 9 top of $0.6431.
The Chaikin Money Flow indicator, a volume indicator that measures the amount of Money Flow Volume over a particular period, reads 0.21 on Tuesday. The indicator typically fluctuates above or below the zero line, similar to other oscillators. When the CMF value is above the zero line, it signals strength in XRP’s uptrend.
The CMF climbed above zero on April 16, confirming the direction of Ripple’s breakout. The indicator therefore supports a bullish thesis for XRP.
The volatility indicator Donchain Channel is used to determine opportunities to take profits by opening long or short positions in an asset. When applied to XRP/USDT 1-day chart, the asset has broken above the midpoint of the Channel. Traders typically use the middle line as an indicator of when to open or close their position.
XRP price has moved above the middle line, climbing towards the upper band, signaling an opportunity for holders to open a long position in XRP. The target for this trade can be the upper band, which aligns with the April 9 top of $0.6431 in the case of XRP.
XRP/USDT 1-day chart
A daily candlestick close below $0.5310, or the 50% Fibonacci retracement of XRP price decline from the April 9 top of $0.6431 to the April 13 low of $0.4188, could invalidate the bullish thesis. In case of a price decline, XRP could find support at the April 20 low of $0.4981, a level that has acted as support for over two months on the daily chart.
SEC vs Ripple lawsuit FAQs
It depends on the transaction, according to a court ruling released on July 14: For institutional investors or over-the-counter sales, XRP is a security. For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token. While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at. Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say. Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation. While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.