Ripple's SEC Legal Battle Intensifies Over Institutional Investor Claims

Ripple's SEC Legal Battle Intensifies Over Institutional Investor Claims

AltcoinsLaw

By Jakub Lazurek

15 Apr 2024 (about 1 month ago)

2 min read

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Ripple faces SEC in court over claims of unfair institutional investor treatment

Ripple's legal confrontation with the U.S. Securities and Exchange Commission (SEC) escalated.

The dispute centered on claims that Ripple unfairly discriminated against certain institutional investors in its XRP sales via the On-Demand Liquidity platform.

The legal dispute started in December 2020, when Ripple was accused of operating an unregistered securities offering.

The current focus is Ripple's alleged failure to disclose discounts given to some institutional investors, which the SEC claims could have harmed other investors.

The defense for Ripple gains momentum following a relevant court decision in the Aron Govil case by the Second Circuit Court of Appeals.

This decision ruled that the SEC cannot force a seller to return profits if the buyer has not suffered a financial loss.

Ripple’s Chief Legal Officer, Stuart Alderoty, points to this decision as a positive sign, indicating that similar outcomes could favor Ripple in its ongoing legal battle.

A legal analyst, Bill Morgan supports this view, stating that if Ripple can prove that no institutional investors suffered financially, this could significantly weaken the SEC’s case.

The SEC's argument for disgorgement—clawing back profits from these sales—is based on the premise that Ripple made $991 million in revenue from these transactions, with expenses just under $115 million.

Morgan emphasizes that the issue isn’t whether losses were incurred by non-institutional investors, but whether the nondisclosure of discounts prevented other institutional investors from securing better terms.

This approach challenges the SEC’s definition of harm, focusing on the possibility of missed opportunities rather than direct financial damage.

As the legal proceedings advance, the outcomes could shape regulatory approaches to digital assets and underline the need for clearer cryptocurrency regulations.

This case underlines the tension between emerging technologies and traditional regulatory frameworks, setting precedents that could influence the future of the crypto industry.

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