Ripple Labs is pushing back against the US Securities and Exchange Commission (SEC) over the SEC’s demands for nearly $2 billion in penalties. Ripple argues that its current financial situation and past contracts are irrelevant to the case.
In their defence, Ripple addresses two key issues in a letter to Judge Analisa Torres from Andrew J. Ceresney of Debevoise & Plimpton LLP. Ripple proposes a penalty cap of $10 million, opposing the SEC’s assertion that Ripple’s current financial status should influence the court’s decision on historical penalties. Ripple contends that its financial condition, evaluated years after the alleged violations, is irrelevant. The defence maintains, “Ripple is not arguing that it may be unable to pay any measured penalty,” and stresses that recent financial statements should not impact the court’s analysis. They also argue that disclosing their financial details is unnecessary, referencing legal precedents like Tropical Sails Corp. v. Yext, Inc., which supports the privacy of financial documents for private companies.
The second major issue is the SEC’s claim that Ripple’s historical contracts are outdated due to changes in XRP sales methods. The SEC views these contracts as irrelevant, but Ripple, represented by CFO Jonathan Billich, insists that past terms remain confidential and commercially sensitive. Billich argues that future counterparties could exploit past contract terms if they were disclosed. Ripple highlights that its sales methods have changed and current XRP sales no longer include conditions like discounts for sophisticated buyers.
Ripple also disputes the SEC’s claim that public disclosure of XRP prices is required under securities law, even if XRP were deemed investment contracts. The court has already ruled that XRP is not a security, making the historical contract prices irrelevant to registered securities. Ripple’s defence emphasises their right to privacy, with Ceresney stating, “Ripple has established a valid, commonly accepted basis for sealing its confidential financial documents.”
As the case approaches its conclusion, the decision on whether Andrea Fox serves as a summary or expert witness, as determined by Magistrate Judge Sarah Netburn, is pending before Judge Torres can rule on the remedies phase.
Ripple’s defence aims to protect its financial privacy and the confidentiality of its past contracts. By highlighting the changes in its sales methods and the irrelevance of its current financial state to past violations, Ripple seeks to reduce penalties and safeguard its business interests. The outcome of this high-profile case will significantly impact the cryptocurrency industry and the regulation of digital assets.
