Ripple Labs has launched a robust 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 presented to Judge Analisa Torres of the Southern District of New York, Ripple detailed its intensified legal defense against the SEC. This comes at a crucial time, as the SEC is seeking penalties close to $2 billion, a figure that starkly contrasts with Ripple’s proposed cap of $10 million.
Ripple’s defense strategy, as outlined in a comprehensive letter written by Andrew J. Ceresney of Debevoise & Plimpton LLP, directly addresses the SEC’s argument that Ripple’s present financial standing should be considered when determining past penalties. Ripple disagrees with this stance and asserts that its financial status, evaluated years after the alleged violations, should hold 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 highlights the lack of necessity in disclosing sensitive financial details, as the court could disregard them without due consideration. The company reinforces this stance by citing legal precedents, such as Tropical Sails Corp. v. Yext, Inc., which recognizes the legitimate privacy interest that privately held companies have in their financial documents.
Ripple’s response to the SEC’s claims also addresses the relevance of its historical contracts. While the SEC dismisses these contracts as outdated and irrelevant due to changes in XRP sales methods, Ripple argues that they remain confidential and commercially sensitive. Revealing them could potentially give future counterparties undue leverage in negotiations. Ripple emphasizes that its current sales of XRP differ significantly from past over-the-counter contracts, with no discounts offered to sophisticated counterparties.
Furthermore, Ripple challenges the SEC’s assertions 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 court must treat the price terms in historical contracts differently from those applicable to registered securities.
This defense strategy highlights 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. He states in the filing, “Even if the SEC’s arguments were plausible, Ripple has still established a valid, commonly accepted basis for sealing its confidential financial documents,” underlining the importance of maintaining confidentiality in such matters.