Ripple Labs has launched a strong legal defense against the claims made by the US Securities and Exchange Commission (SEC), directly challenging two key arguments put forth by the regulatory body.
In a recent filing submitted to Judge Analisa Torres of the Southern District of New York, Ripple has intensified its legal defense against the SEC. This comes at a critical moment, as the SEC is seeking penalties of nearly $2 billion, a significant difference from Ripple’s proposed cap of $10 million.
Ripple’s defense strategy, detailed in a comprehensive letter written by Andrew J. Ceresney of Debevoise & Plimpton LLP, addresses the SEC’s argument that Ripple’s present financial standing should be taken into account when determining past penalties. Ripple disagrees with this assertion, stating that its financial status, evaluated years after the alleged violations, has no relevance to the case.
The defense argues, “Ripple is not arguing that it may be unable to pay any measured penalty, and there is otherwise no reason to believe that Ripple’s current financial statements (from years after the challenged conduct) are relevant to the Court’s analysis.”
Additionally, Ripple emphasizes the lack of necessity in disclosing sensitive financial details that the court could disregard without proper consideration. The company supports this stance with legal precedents, such as Tropical Sails Corp. v. Yext, Inc., which recognizes the privacy interest in the financial documents of privately held companies.
Ripple’s response to the SEC also challenges the relevance of its historical contracts. While the SEC dismisses these contracts as outdated and irrelevant, Ripple argues that they remain confidential and commercially sensitive. Revealing them could potentially give future counterparties an unfair advantage in negotiations. Ripple highlights the differences between its current sales of XRP and past over-the-counter contracts, where no discounts were offered to sophisticated counterparties.
Furthermore, Ripple disputes the SEC’s claims regarding the necessity of public disclosure of XRP prices under securities law, even if they were considered investment contracts requiring registration. Given the court’s previous determination that XRP is not a security, Ripple argues that the price terms in historical contracts should be treated differently from those applicable to registered securities.
This defense strategy emphasizes Ripple’s firm stance on the non-relevance of its current financial situation and historical contracts to the SEC’s case. Andrew J. Ceresney, representing Ripple, emphasizes the company’s right to privacy and commercial sensitivity in the financial sector, stating, “Even if the SEC’s arguments were plausible, Ripple has still established a valid, commonly accepted basis for sealing its confidential financial documents,” highlighting the importance of maintaining confidentiality in such matters.