Wrinkle vs. SEC Reaches Climax With Final Filing: Details

The legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has intensified with the SEC’s latest lawsuit, which marks the final filing before Judge Analisa Torres of the Southern District of New York deliberates on the remedy phase of this landmark case .

Wrinkle vs. SEC: The final move

In his submit on May 20, 2024, the SEC issued a comprehensive response to Ripple’s request to seal certain financial documents and other evidence critical to the case. The SEC’s letter to Judge Torres expresses fervent opposition to Ripple’s motion, particularly regarding the concealment of financial data and contractual terms that are integral to the Court’s evaluation of appropriate remedies.

The SEC’s opposition rests on the principle of public access to court documents, a cornerstone of legal transparency and accountability. Citing Lugosch v. Pyramid Co. of Onondaga, the SEC emphasizes the historic importance of public access, especially in cases involving public interests and regulatory enforcement. “The common law right of public access to court records is firmly rooted in our nation’s history,” the SEC strongly argues in its memorandum, emphasizing the need for transparency for public scrutiny and trust.

While the SEC agrees to the sealing of five exhibits in their entirety, it challenges the company’s request to withhold key financial figures and terms of contracts cited in deliberations on solutions. This includes details that would reveal Ripple’s current financial health, the volume of recent XRP sales, and the details of its revenues and expenses – all vital for assessing the company’s compliance and determining any potential fines.

The SEC critically assesses the motives for sealing: “Ripple invites the public to form opinions on the merits of the SEC’s positions. It cannot simultaneously conceal from them the evidence on which that position is based,” the SEC said, pointing to a contradiction in the company’s public communications versus the court filings.

Ripple’s justification for its sealing requests cites the potential damage that public disclosure of sensitive financial data could do to its competitive position in the marketplace. However, the SEC counters this by highlighting inconsistencies in Ripple’s argument about the relevance and sensitivity of the information.

The Commission disputes the claim that the sealed information is not relevant and states: “Once an item is deemed relevant to the exercise of judicial power, the weight to be given to the presumption of access should be determined by the role of the material in question in the exercise of the judicial power of Article III.”

The SEC also points to the antiquity of some of the information Ripple wants to seal, arguing that financial details from recent years are unlikely to have a significant impact on Ripple’s current business operations. “Outdated business documents cannot support what is necessary determination of damage,” the SEC argues, reinforcing its position on the need for transparency of legacy financial data.

As Judge Torres prepares to make her ruling, the crypto industry is watching closely. The stakes are remarkably high, with the SEC proposing fines and sanctions of around $2 billion, while Ripple’s counter offer advises a maximum fine of only $10 million.

Notably, the only remaining step in the Ripple vs. SEC matter before Judge Torres can make her final decision is for Judge Netburn to determine whether Andrea Fox is a summary or expert witness. However, this decision alone could lead to further complications.

At the time of writing, XRP was trading at $0.53487.

XRP price
XRP price, 1 week chart | Source: XRPUSD on TradingView.com

Featured image from Shutterstock, chart from TradingView.com

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