In a series of bold statements, Ripple’s Chief Legal Officer Stuart Alderoty has sharply criticized the U.S. Securities and Exchange Commission (SEC), highlighting a crucial phase in Ripple’s ongoing legal challenges. Alderoty’s remarks reflect a broader issue in the intersection of cryptocurrency and regulatory practices, especially under the tenure of SEC Chair Gary Gensler.
Alderoty has accused the SEC of engaging in practices recently questioned by federal judges, marking a potential shift in how legal authorities view the agency’s approach. These allegations include the SEC’s alleged suppression of information regarding meetings with a controversial figure, raising questions about the agency’s transparency and decision-making.
This conflict isn’t new; Ripple has been in the SEC’s crosshairs since December 2020 over allegations of violating federal securities laws through XRP sales. However, Judge Analisa Torres, overseeing the case, has largely found in favor of Ripple, indicating that most of Ripple’s transactions complied with the law.
The SEC’s difficulties aren’t limited to Ripple. Their stance on cryptocurrency regulation faced a notable blow in a dispute with Grayscale Investments over a proposed Bitcoin ETF. The court criticized the SEC’s regulatory methods as inconsistent and unjustifiable.
The case’s implications extend to other legal battles, such as the SEC’s recent loss against Aaron Govil in the Second Circuit Court of Appeals. Legal commentators like John Deaton and Jeremy Hogan suggest this could influence the outcome of the SEC v. Ripple case, particularly in its remedies phase. The court in the Govil case stressed that any compensation should be limited to parties who experienced actual financial harm.
As the Ripple case heads towards its remedies phase, with a discovery deadline set for February 12, 2024, the SEC is expected to seek a significant penalty. The proposed fine, potentially around $770 million, is based on Ripple’s revenue from XRP sales to institutional clients. However, this figure might be adjusted for sales outside the U.S. and legitimate business expenses.
The unfolding of Ripple’s legal battle is not just a matter for the company and the SEC but a scenario closely watched by the financial and legal communities. It represents a critical juncture in cryptocurrency regulation and enforcement, with potential implications for how digital currencies are treated under U.S. law.