A recent development in the ongoing legal battle between Ripple and the SEC has clarified the previous speculation about Ripple’s use of trading bots.
Court documents unearthed by community members reveal that the SEC contends Ripple employed trading bots from GSR, not to suppress the price of XRP as initially believed, but to mitigate downward pressure and push its price up.
Read Also: David Schwartz Explains Why Ripple Sold XRP Using GSR’s Trading Bots
Community Speculation vs. SEC’s Claims
Recently, there were rumors that Ripple’s utilization of GSR’s trading bots contributed to a suppressed XRP price over time. This theory resonated with the community’s perception of the digital asset’s underperformance.
Recall that Ripple Chief Technology Officer (CTO) David Schwartz recently weighed in on the discussion. However, newly revealed court documents, filed in June 2023, present a contrasting perspective from the SEC.
The SEC, through a redacted expert, argues that Ripple engaged GSR to conduct XRP transactions with the intention of either boosting the price or establishing a price floor to prevent significant declines.
The expert’s analysis, based on various resources, including communication records, data, and historical price information, reportedly identified instances where Ripple’s directives to GSR coincided with upward price movements or halted price drops for XRP.
Market-Making Strategies and Lock-Up Periods
The SEC’s expert further highlights Ripple’s strategic use of market-making firms, including GSR, to manage the selling of XRP and counter downward price pressure.
Additionally, the documents mention Ripple’s use of lock-up periods for specific XRP sales, similar to those employed in traditional Initial Public Offerings (IPOs). This strategy, according to the expert, aimed to prevent an immediate and drastic price drop following the sale of large XRP quantities.
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Ripple’s Incentives and SEC’s Argument
The SEC’s expert asserts Ripple and its executives had strong incentives to influence XRP’s price, supported by over $1 billion worth of transfers to entities like GSR. These transfers coincided with GSR’s XRP selling on Ripple’s behalf. Ripple allegedly used XRP sales proceeds to cover an $800 million funding gap, implying a motive to manage XRP’s price.
Read Also: What are Market Makers and How Do They Operate in a Trading Environment?
The SEC contends Ripple directed GSR to buy XRP low and sell high, aiming to benefit investors. These claims, however, are part of the ongoing lawsuit, with the court yet to determine their validity.
However, these shift the intention of Ripple in a different direction. It also calls Ripple’s strategy into question, as XRP has not met the community’s expectations, causing some investors to leave XRP for other tokens.
As the lawsuit progresses, more information will be revealed, shedding light on the GSR trading bot discussion and Ripple’s influence on XRP’s price movements.
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