SEC Rejects Ripple’s Claims in XRP Lawsuit

The United States Securities and Exchange Commission (SEC) has submitted its final response to the ongoing lawsuit against Ripple, disputing Ripple’s claims of acting without recklessness in managing the XRP cryptocurrency. The SEC emphasized that the court had previously dismissed Ripple’s “fair notice” defense despite the company’s assertion of no widespread uncertainty about XRP’s legal status.

In its filing, the SEC highlighted Ripple’s efforts to downplay its liability by citing cooperation with regulatory authorities since the initial coin offering of XRP in 2013. However, the SEC argued that this compliance does not eliminate the potential for future violations. The commission also addressed Ripple’s claims of restructuring future XRP sales and following legal advice, stating that these actions do not accurately reflect judicial orders and compliance implications.

Furthermore, the SEC rejected Ripple’s defenses regarding XRP sales outside the U.S. and to accredited investors, noting that these arguments did not hold up during summary judgment. The commission also dismissed Ripple’s modifications to contracts for on-demand liquidity sales, pointing out that these revised contracts still lack necessary restrictions, posing ongoing legal risks.

Despite Ripple’s assurances and lack of recent violations, the SEC maintains that the potential for future breaches exists, justifying the need for injunctions to ensure ongoing compliance by Ripple.

In response to the SEC’s actions, Ripple’s chief legal officer, Stuart Alderoty, criticized the commission’s approach. He highlighted the puzzling nature of the SEC’s actions for financial regulators outside the U.S. who have established or are in the process of creating regulatory frameworks for the crypto sector.

Ripple recently contested the SEC’s $1.95 billion penalty for institutional sales of XRP, with the regulator proposing disgorgement of $876 million, prejudgment interest of $198 million, and a civil penalty of $876 million. Ripple has argued that the civil fine cannot exceed $10 million.

The Digital Chamber also criticized the SEC over a Wells notice issued to Robinhood Crypto.