Famous crypto influencer ‘MetaLawMan’ who was recently active on Twitter has shedded light on the SEC’s case against Ripple, especially concentrating on the SEC’s recent filing regarding damages and disgorgement. On X he posted hsi assertion that the SEC has not convincingly added anything to the discussion on victims or why disgorgement ought to be the favored remedy.
According to MetaLawMan, the SEC essentially relies on one district court case, SEC v iFresh, which held that the “pecuniary harm” requirement is met when a stockholder’s investment is inflated artificially. This is the point of view of the SEC.
It asserts that those institutional buyers who paid a lower discount for XRP rather than others, are those who suffered an inflated price which is a clear indication of pecuniary harm. But MetaLawMan expressed doubt whether the facts of this case were correctly interpreted, he said it was a misinterpretation of the Second Circuit’s statement in SEC v. Govil.
“The SEC’s reliance on iFresh as precedent for establishing pecuniary harm raises concerns,” MetaLawMan noted, pointing out that the judge who authored the iFresh decision designated it “NOT FOR ELECTRONIC OR PRINT PUBLICATION.” He further commented, “It used to be improper to cite a decision with a ‘not for publication’ designation. It’s the weakest possible authority for anything.”
SEC’s Justification for Disgorgement
The SEC’s complaint that Ripple violated the securities laws, filed in the court, outlines why the court should issue an injunction and a disgorgement order. The SEC states that the injunction would be reasonable if the court issues it to prevent further violations, because Ripple’s main business still consists in the sale of unregistered XRP tokens. The SEC claims that Ripple’s recently formed business structure may be linked to future violations, since it intends to put out more unregistered crypto assets.
The court filing points out that “Ripple has strong incentives to sell XRP even if doing so violates the law.” It continues, “That it has increased ODL [On-Demand Liquidity] sales, even after the SEC sued it over those sales, demonstrates as much.” This reasoning, along with Ripple’s refusal to admit wrongdoing and perceived deflection of blame, underpins the SEC’s request for injunctive relief.
The filing of the SEC also contains the stance that Ripple’s claim of the absence of pecuniary harm to the investors is inconsistent. SEC says, “Pecuniary harm can occur when disclosure failures lead to inflated prices.” It further argues that even if they made a profit by buying and selling XRP, but still suffered the pecuniary loss under the artificially inflated price due to the lack of proper disclosure.
Likelihood of Injunctive Relief and Disgorgement
He acknowledged that the court might follow the iFresh way and find that the Ripple institutional investors suffered pecuniary harm, but it is still improbable. By this, he pointed out the SEC’s inconsistency when it relies on a non-binding case to prove its case, whereas the SEC itself justifies its disgorgement with no concrete evidence.
However, even though MetaLawMan criticizes the SEC’s approach, the court filing shows that the SEC’s aim is to avoid recurrence through the injunctive relief and imposition of fines and penalties that punish and deter the future violations. It further emphasizes that SEC is determined to hold Ripple responsible for its deeds and the way it failed to provide proper disclosure practices during its business transactions.
At the end of the day, the outcome of this case might be crucial for the crypto world in terms of the SEC’s regulating approach, with the crypto world community and legal experts being very attentive to the SEC’s actions in this matter.
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