It goes without saying that the dispute between the U.S. Securities and Exchange Commission and Ripple Labs over whether XRP should be considered a security is one that will likely have consequences for the entire industry.
The case has been going on for many years and is currently in the trial phase. Below are the most important developments to date.
Trouble at the SEC?
As recently reported, the Director of the Commission's Electronics and Cryptoassets Unit – David Hirsh – recently resigned.
Hirsh announced his resignation on LinkedIn. He has more than nine years of service to the SEC. He also denied rumors that he would be working on a cryptocurrency initiative called Pump.fun, saying that he would spend some time with his family before moving on to a new chapter in his career.
This comes days after the SEC lowered the requested fine from a whopping $2 billion to $102.6 million.
This was in response to Ripple's legal team, which requested that the fine be reduced to no more than $10 million.
The SEC states:
“Ripple avoids comparing Terraform's settlement penalty to the total profits from the breach. That ratio ($420 million/$3.587 billion) is significantly higher: 11.7%.
Applying it to gross profits of $876.3 million, the SEC here asks the court to overrule, resulting in a much larger figure, a fine of $102.6 million, compared to the $10 million ceiling. that Ripple requires.”
Fight on many fronts
Ripple's legal troubles don't stop at the lawsuit against the SEC. The company's CEO, Brad Garlinghouse, is also involved in another lawsuit in California.
It concerns the following statements he made many years ago:
“I buy XRP, I buy XRP very, very long as a percentage of my personal balance sheet. . . . .
[I] don't use some of the other [digital] assets long-term, because I'm not clear on what the utility really is, what problem they actually solve. . . if you're solving a real problem if it's a large scale problem then I think you have a great opportunity to take that forward.
Obviously we were really lucky, I stayed with XRP for a very, very long time, there's a manifestation in the industry of HODL, instead of holding, it's HODL. . . I'm on HODL's side.”
The case was allowed to proceed to trial, but the previous judge dismissed many of the allegations, including claims that Ripple violated federal securities laws.
Ripple's Chief Counsel said:
CA judge dismissed all claims that Ripple violated federal securities laws. NY's ruling that XRP is not a security remains undisturbed.
A state law claim, based on the 2017 declaration, will be heard.
The plaintiff who did not buy directly from Ripple and cannot say whether he heard the statement before the transaction allegedly lost several hundred dollars. We look forward to that cross-examination.
Garlinghouse also reiterated that this is a big win for the company and that he stands behind the statements he made in 2017.
