Ripple Fights Back Against SEC

Ripple Labs has strengthened its defense against the US Securities and Exchange Commission (SEC) by addressing two critical points in their ongoing legal battle. As the SEC seeks nearly $2 billion in penalties, Ripple proposes a much lower cap of $10 million.

In a letter to Judge Analisa Torres, Andrew J. Ceresney of Debevoise & Plimpton LLP argues against the SEC's claim that Ripple's current financial condition should impact the court's decision on historical penalties. The SEC asserts that this information is crucial for determining remedies. Ripple counters by saying its financial status, evaluated years after the alleged violations, is irrelevant.

The defense states, “Ripple is not arguing that it may be unable to pay any measured penalty," emphasizing that recent financial statements shouldn't affect the court's analysis. Ripple also highlights that revealing its financial details is unnecessary and cites legal precedents, like Tropical Sails Corp. v. Yext, Inc., which support the privacy of financial documents for private companies.

Another major point of contention is the SEC’s claim that Ripple’s historical contracts are irrelevant due to changes in XRP sales methods. The SEC labels these contracts as outdated, but Ripple, through CFO Jonathan Billich, insists that these past terms are still confidential and commercially sensitive. Billich explains that future counterparties could gain an unfair advantage if they accessed past contract terms. Ripple points out that its sales methods have evolved, and current XRP sales do not include the same conditions, such as discounts for sophisticated buyers.

Ripple also disputes the SEC’s assertion that public disclosure of XRP prices is necessary under securities law, even if XRP were deemed investment contracts. The court has already ruled that XRP is not a security, making the historical contract prices irrelevant to registered securities.

Ripple’s defense highlights the high stakes involved, with Ceresney stating, “Ripple has established a valid, commonly accepted basis for sealing its confidential financial documents,” underscoring the company's right to privacy. As the case nears its end, the final decision on whether Andrea Fox serves as a summary or expert witness, as decided by Magistrate Judge Sarah Netburn, is awaited before Judge Torres can rule on the remedies phase.

Ripple's detailed defense aims to protect its financial privacy and the confidentiality of its past contracts. By stressing the changes in its sales methods and the irrelevance of its current financial state to past violations, Ripple seeks to reduce penalties and safeguard its business interests. The outcome of this high-profile case will significantly impact the cryptocurrency industry and the regulation of digital assets.