In the latest development in the high-stakes legal battle between the Securities and Exchange Commission (SEC) and Ripple Labs, the SEC has boldly responded to Ripple’s recent legal filing. On July 3, 2024, the SEC filed a new document in the United States District Court for the Southern District of New York, seeking to counter the company’s reliance on a recent court ruling in the case against Binance Holdings, Ltd. to oppose harsh penalties in its ongoing case.
SEC Counters Ripple
The SEC depositwritten by Jorge Tenreiro, strongly criticizes Ripple interpretation and application of the Binance decision. Tenreiro points out that the firm’s citation of the Binance decision is erroneous and irrelevant to the issue at hand, stating: “That ‘authority’ is a decision on a motion to dismiss in SEC v. Binance Holdings, Ltd., which has no relevance to the pending motion on appeals.”
Tenreiro further highlights the disconnect in the firm’s argument, noting that it “highlights an observation in the nearly 90 pages of the Binance Decisionand attempts to extrapolate from this general observation about the effectiveness of the SEC’s litigation strategy (…) the idea that Ripple did not act with “reckless disregard for the law” such that “severe remedies” are not warranted.” He criticizes this approach, saying that “it clearly does not follow.”
The SEC also accuses the company of omitting crucial elements of Binance’s decision that weaken its case. Specifically, the court’s rejection of Binance’s fair notice defense parallels the Ripple case. The SEC cites Binance’s decision, noting, “It was ‘notable’ that Defendants were notified that the SEC could sue them,” which closely aligns with the SEC’s argument that the company had received ample warning through legal notices regarding the sale of XRP.
Additionally, the SEC points to prior court decisions that have consistently held that Ripple was indeed aware of the potential securities implications of its actions. The agency further noted in its response that, as in the Ripple case, the Binance court confirmed that the crypto industry was properly notified of the regulatory framework through the SEC’s July 2017 DAO notice.
This directly challenges the fintech’s position on the lack of regulatory clarity, highlighting that the SEC had clearly signaled its regulatory intentions, which should not have been unexpected for Ripple. This point is crucial to the SEC’s argument for stricter penalties of over $2 billion, contrary to what Ripple has stated. contention that the civil penalty should not exceed $10 million.
The ongoing case has broader implications for the cryptocurrency industry, including how digital assets are regulated and what enforcement actions can be expected from U.S. regulators. The SEC’s recent filing underscores its goal of establishing oversight over the cryptocurrency industry.
At press time, XRP was trading at $0.45729.
Featured image created with DALL·E, chart by TradingView.com
