Ripple Counters SEC on Financial Relevance, Contractual History

Ripple Challenges SEC on Financial Relevance and Contractual History in Latest Filing

Ripple Labs has intensified its legal battle against the U.S. Securities and Exchange Commission (SEC) by countering two crucial claims from the SEC in a recent court filing. This legal skirmish, which unfolds in the Southern District of New York, pits Ripple’s defense against the SEC’s demand for nearly $2 billion in penalties, significantly higher than Ripple’s suggested $10 million cap.

In a detailed letter submitted to Judge Analisa Torres, Ripple’s legal team, led by Andrew J. Ceresney of Debevoise & Plimpton LLP, contests the SEC’s position that Ripple’s current financial status should influence the court’s penalty decisions for alleged past misconduct. The SEC argued that this financial information is “important to the Court’s determinations,” but Ripple rebuffs this, asserting that its financial health years after the purported violations is irrelevant to the case.

Ripple emphasizes that it is not disputing its ability to pay a measured penalty but insists that the financial data from years after the alleged misconduct has no bearing on the court’s analysis. The company maintains that disclosing sensitive financial information is unnecessary, citing legal precedents like Tropical Sails Corp. v. Yext, Inc., which uphold the privacy interests of privately held companies.

The second major issue addressed in Ripple’s filing concerns the SEC’s assertion about the irrelevance of Ripple’s historical contracts due to changes in how XRP is sold. The SEC dismissed these past contracts as “stale” information. However, Ripple, through the declaration of its CFO, Jonathan Billich, argues that these past contracts are still confidential and commercially sensitive. Billich highlights that future counterparties could leverage these past contract terms if they were made public, potentially harming Ripple’s competitive position.

Ripple underscores that its current sales of XRP are conducted without the conditions seen in past over-the-counter contracts, such as discounts offered to sophisticated counterparties. The company further disputes the SEC’s claim regarding the need for public disclosure of XRP prices under securities law, noting that the court has previously determined that XRP is not a security. This distinction means that the price terms in historical contracts are not subject to the same disclosure requirements as registered securities.

Ripple’s defense strategy highlights the high stakes involved in this legal battle. The company’s firm stance on the non-relevance of its current financial situation and historical contracts underscores its commitment to protecting its commercial interests and financial privacy. Ceresney’s filing reinforces this by stating, “Even if the SEC’s arguments were plausible, Ripple has still established a valid, commonly accepted basis for sealing its confidential financial documents,” emphasizing the company’s right to privacy and commercial sensitivity.

As the legal proceedings near their conclusion, the decision on whether Andrea Fox serves as a summary or expert witness, as determined by Magistrate Judge Sarah Netburn, remains the final step before Judge Torres can issue her ruling on the remedies phase of the case. At the time of this report, XRP traded at $0.5261.

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