In a recent development that has sent ripples through the cryptocurrency world, Judge Analisa Torres rejected the SEC’s motion for an interlocutory appeal in the ongoing case against Ripple. This decision is a significant setback for the SEC and upholds the mid-July ruling that declared XRP not to be a security.
In addition, Ripple was handed a substantial $700 million fine for the alleged unregistered sale of securities to various legal entities. The trial will resume on April 23, 2024.
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A Regulatory Veteran’s Opinions
Marc Fagel, a retired lawyer who specialized in securities litigation and SEC enforcement, has shared his thoughts on the potential future course of action for the SEC in this high-stakes legal battle.
Fagel began by clarifying that the SEC didn’t have the option to reject the court’s decision on its interlocutory appeal. He stated that the second circuit would not accept an interlocutory appeal denied by the district court. He also added that no lawyer would do that.
According to Fagel, the SEC now faces the imperative task of addressing the individual case against Ripple. This can be achieved through several means, including proceeding to trial, reaching a settlement, or a case dismissal.
Furthermore, the SEC must determine the appropriate remedies for Ripple’s alleged illegal securities offering. This process may involve negotiation for a settlement or presenting the case in court.
In another reply, Fagel stated that although he disagrees with the SEC’s methods for regulating the crypto industry, there are places where they are correct. He pointed out that the SEC was right to sue Ripple for illegally raising $700 million, violating securities laws.
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Fagel stated that the case’s unique nature makes it hard to estimate the potential settlement amount for the $700 million violations. However, the settlement amount might be less. According to Fagel, The SEC does not have the leverage because the court is not favorably inclined toward them. He described the case as an outlier.
He also criticized the SEC’s strategy, particularly its decision to include Ripple’s top executives, Brad Garlinghouse and Chris Larsen, in the original complaint. Fagel argued that pursuing individual cases against these executives could prove futile, given the perceived low probability of success.
This is because the burden of proof for aiding and abetting a violation is greater than for proving a registration violation. The SEC’s approach to this case has ignited debates about its potential impact on retail investors. The lawsuit has also negatively impacted XRP’s adoption. Although the court has mandated that both parties have a settlement conference, many expect the case to continue.
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