In the XRP lawsuit, the US Securities and Exchange Commission (SEC) filed its motion for remedies and entry of final judgment against Ripple, proposing a suite of penalties that includes injunctive relief, disgorgement of profits, and a notable $2 billion in civil penalties today. But that’s not the whole story as the 210-page document contains some interesting statements and assertions.
#XRPCommunity #SECGov v. #Ripple #XRP The @SECGov has filed its Motion for Remedies and Entry of Final Judgment, its Memorandum of Law in Support of that Motion, and its "Proposed" Judgment.https://t.co/uPlpJ7Tmon
— James K. Filan
(@FilanLaw) March 26, 2024
Did Ripple Favor Select Institutional Investors?
One of the assertions made in the SEC document and pointed out by XRP community lawyer Bill Morgan was a key revelation that Ripple engaged in discriminatory pricing practices, offering substantial discounts on XRP tokens to a select group of institutional investors. This practice, the SEC alleges, created an uneven playing field, benefiting certain “favored” investors at the expense of others.
XRP community lawyer Bill Morgan provided a summary of this aspect, highlighting the potential damage to Ripple’s standing in the eyes of institutional investors. “The SEC’s brief is a possible problem for Ripple beyond this case. The SEC is able to argue that there were two groups of institutional sales investors (it calls them favored and unfavored) and Ripple offered one group significant discounts in XRP price over the other group that did not receive them,” Morgan noted via X (formerly Twitter).
He further delved into the SEC’s claim that such practices harmed the “unfavored” group of investors to the tune of $480 million, a figure based on assumptions that Morgan suggests need thorough examination. “The evidence of causation of this alleged harm seems thin,” he added.
The SEC’s filing goes on to argue that Ripple’s sales tactics, specifically the discounted sales to certain investors, directly contributed to downward pressure on the overall market price of XRP. This point is not just a matter of regulatory compliance but also raises the specter of legal action from those institutional investors who may feel aggrieved by not being privy to the same discounts.
Morgan also touched upon the ramifications of these actions being classified as investment contracts by the SEC, saying, “As these sales to institutions were found to be investment contracts, it means that this offering of discounts to some but not other institutions is the very disclosure according to the SEC that should have, and would have been made to the institutions, if the sales to institutions had been registered.”
He further noted that these claims by the SEC are also not great for the reputation of Ripple. “Not sure this revelation is great for Ripple’s reputation with institutional investors,” Morgan remarked.
Ripple CLO Alderoty Responds
Ripple’s Chief Legal Officer, Stuart Alderoty, also issued a broad response to the SEC’s filing via X, vehemently disputing the narrative presented by the regulatory body. Alderoty stated, “Our response will be filed next month, but as we all have seen time and again, this is a regulator that trades in statements that are false, mischaracterized and designed to mislead.”
He further attacked the SEC for its illegitimate reasoning, stating: “They stayed true to form here. Rather than faithfully apply the law, the SEC remains bent on wanting to punish and intimidate Ripple – and the industry at large. We trust the Court will approach the remedies phase fairly.”
At press time, XRP traded at $0.64365.
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