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SEC vs. Ripple: End in Sight as Parties Argue Over Remedies

More legal tussling as the blockchain company claims that the so-called Fox Declaration should have been classified as expert testimony, not "standard summary evidence," as the SEC claims.

Ripple and the U.S. Securities and Exchange Commission (SEC) continue their legal battle, now focusing on the validity of certain materials and testimonies as the trial enters its critical phase.

In late March, the SEC argued for an injunction and nearly $2 billion in penalties, submitting new testimony from Andrea Fox, an SEC Enforcement Division Accountant.

A few weeks later, Ripple opposed the SEC's request with a motion to strike the "Fox Declaration" due to "sandbagging." In legal terms, this refers to a party withholding important information until the last minute, putting the other side at a disadvantage. Ripple claimed that the SEC failed to provide Fox's identity and testimony during the remedies-only discovery phase, hindering the blockchain firm's ability to respond properly.

The SEC countered Ripple’s objections on Monday, April 29, describing the testimony as "standard summary evidence in support of calculations for disgorgement." The regulator said this type of evidence is routine and appropriate for calculating financial remedies in legal proceedings.

"The SEC submitted the Fox Declaration to aid the Court by presenting essentially three calculations [...] With one minor exception, the Fox Declaration summarizes only documents produced or served by Ripple, including Ripple’s audited financial statements, interrogatory answers, and certain sales records."

The agency also cited a previous ruling in which Judge Analisa Torres dismissed similar objections from Ripple about testimonial classifications.

Ripple's reply brief, filed last Thursday, challenges these claims. Ripple maintains that Fox's testimony involves complex accounting assessments and should be classified as expert testimony, not merely as a summary. This distinction is crucial because it would suggest that the SEC failed to provide an expert report during the discovery phase.

According to Ripple, Fox's work, which involves major analysis and conclusions beyond simple calculations, "qualifies her unequivocally" as an expert under Federal Rule of Evidence 702(a). Ripple also took a swipe at the SEC’s timing and transparency in disclosing Fox as a witness, claiming procedural discrepancies that could prejudice the court.

In addition, Ripple noted that the SEC did not address a key argument in its last motion concerning cases in which judges dismissed entire testimonies for improper disclosure.

The court is expected to rule on Ripple's dismissal motion imminently. According to a tweet by pro-XRP lawyer James K. Filan, the SEC submitted its reply brief under seal on May 6, specifically addressing the remedies it seeks. This document, which is not yet public, is expected to directly challenge Ripple's motion to the SEC's earlier request for a punitive penalty and an injunction against the sale of XRP to institutional investors. The regulator will provide a public redacted version of the reply brief and supporting documents as soon as today. Parties are expected to file omnibus letter motions to "seal all materials relating to the remedies-related briefing" by May 13 and opposition letters by May 20.

Another Pro-XRP lawyer, Jeremy Hogan, said on X that he expects the SEC to win the motion. Other Ripple supporters shared a similar sentiment and said the court would allow Fox to testify and Ripple to depose her. Some expect the judge to appease the regulator by fining Ripple: "I’m saying that the Judge will order 0 disgorgement but throws the SEC a bone and orders Ripple to pay a $100 million penalty," Hogan told CryptoLaw on April 23.

XRP prices dipped on May 1 before bumping back to above $0.51 the next day in anticipation of Ripple's reply brief, according to Coingecko. The token has been on a downward trend since mid-April and seems to be getting more traction, as industry experts expect the lawsuit to conclude over the next three months. XRP currently stands at around $5.2 at the time of reporting and even reached over $5.8 on May 5 in anticipation of the SEC's remedies reply brief.

The Timeline

  • May 13 to May 20, 2024: The given timeframe for the final filings to seal the materials of the remedy phase.
  • May 6, 2024: The SEC filed its remedy-related reply brief (under seal) in response to Ripple's motion to strike the injunction request.
  • May 2, 2024: Ripple filed its reply brief.
  • April 29, 2024: The SEC filed a memorandum of law in opposition to Ripple's motion.
Ripple Opposes SEC’s Proposed $2 Billion Fine in XRP Lawsuit
The firm calls the penalty “draconian” and unjustified, arguing that a fine closer to $10 million would be more appropriate.
  • April 22, 2024: Ripple filed its opposition against the SEC's fine request and a motion to strike expert testimonies due to "sandbagging."
SEC Demands Nearly $2 Billion Penalty From Ripple Labs
Ripple faces a hefty potential financial penalty following a new proposal from the SEC. The firm maintains the sales were legal and plans to contest the charges in April.
  • March 25, 2024: The SEC filed a proposal for judgment, demanding nearly $2 billion in penalties against Ripple.
  • October 23, 2023: The SEC voluntarily dismissed charges against the individual defendants (Garlinghouse & Larsen) with Judge Torres' approval.
SEC Loses Motion for Appeal Against Preliminary Ripple Judgement
In another victory for Ripple, a federal judge has dismissed the SEC’s appeal request, paving the way for a final trial in April. Ripple has also recently secured a Singapore license, solidifying its commitment to the Asia Pacific expansion.
  • October 4, 2023: Ripple's Singapore subsidiary obtained its license to operate in the country. The trading volume of XRP nearly doubled.
  • October 3, 2023: Judge Torres dismissed the SEC's request for an interlocutory appeal, as it does not meet the exceptional circumstances necessary.
Ripple Set to Fight SEC’s Appeal Against July’s Court Ruling
The Ripple vs SEC case is sadly still far from being settled. In mid-August the judge granted the SEC’s request to file an interlocutory appeal, although Ripple now claims the regulator has failed to satisfy all the prerequisites necessary to justify this.
  • September 8, 2023: The SEC's deadline to file its response.
  • September 1, 2023: Ripple filed its response to the appeal and stated that the SEC lacked any legal grounds for the appeal's success or relevance.
  • August 18, 2023: Court deadline for the SEC to file its appeal.
  • August 15, 2023: Judge Torres granted the SEC's request to file an interlocutory appeal. She also filed a notice of appearance for an investment banker declarant.
Ripple Secures a Partial Win Against the SEC
A U.S. judge ruled yesterday that Ripple’s XRP token is not a security for programmatic sales. Several exchanges are planning to relist XRP on their platforms following the ruling, and many major crypto prices saw a boost.
  • July 13, 2023: Judge Torres ruled that XRP is not a security in the case of programmatic sales but that the token does meet the definition of security for sales made to institutional investors.
Ripple vs SEC: Unsealing the Hinman Speech
SEC lawsuits against Coinbase and Binance, the upcoming unveiling of crucial documents, House hearings on the future of crypto: the end might be near for Ripple in its ongoing legal dispute with the SEC.
  • June 13, 2023: The Hinman documents were expected to be released.
  • June 5, 2023: The SEC removed Hinman's biography from its website.
  • May 19, 2023: Reports emerged that the SEC and Ripple filed a joint letter requesting an extension to submit the Hinman speech.
  • May 16, 2023: Judge Torres rejected the SEC's motion to keep the Hinman speech sealed.
SEC vs Ripple: Ruling Expected Anytime Soon
The protracted legal dispute between Ripple, a California-based tech company, and the U.S. SEC has lasted for more than 28 months, prompting widespread speculation regarding the date of the final ruling. Ripple supporters suggest that the verdict may be announced by the end of April.
  • April 18, 2023: SEC Chair Gary Gensler testified at a congressional hearing without revealing whether ether was considered a security.
  • April 16, 2o23: John E. Deaton shared a 2018 video featuring Tim Draper and Gary Gensler discussing potential lawsuits and the influence on financial regulators.
  • March 6, 2023: Judge Torres issued an initial ruling excluding expert testimony from the summary judgment process in Ripple's legal battle with the SEC.
Ripple vs SEC Updates
The ongoing dispute between Ripple and SEC is closely followed by crypto participants and investors alike, with many anticipating the outcome’s potential impact on the market.
  • March 3, 2023: Ripple filed a Supreme Court letter to Judge Torres.
  • January 2023: Multiple organizations, including Coinbase, submitted amicus briefs in support of Ripple.
  • November 30, 2022: SEC and Ripple submitted final submissions to the summary judgment motions.
  • November 7, 2022: The LBRY blockchain lost a similar case against the SEC, resulting in a decline in XRP's value.
  • September 17, 2022: Both the SEC and Ripple filed motions for summary judgment.
  • January 24, 2022: Judge Netburn granted the SEC until February 17 to appeal the decision regarding sensitive government documents in the case.
  • August 31, 2021: Ripple filed a motion requesting the SEC disclose its internal crypto trading policies.
  • June 14, 2021: The SEC's deadline for disclosing internal crypto trading policies was extended.
  • April 13, 2021: SEC Commissioner Hester M. Peirce published the Token Safe Harbor Proposal 2.0.
  • March 22, 2021: Judge Netburn distinguished XRP from BTC and ETH in terms of currency value and utility.
  • March 8, 2021: The SEC requested an immediate hearing in response to Ripple's arguments.
  • March 3, 2021: XRP holders led by John E. Deaton contested the SEC's lawsuit, arguing that XRP is not a security.
  • December 21, 2020: The SEC filed a lawsuit against Ripple Labs, Garlinghouse, and Larsen.