WASHINGTON – The U.S. Securities and Exchange Commission (SEC) has stepped up its legal action against Ripple Labs Inc. by filing a response further supporting its request to force the blockchain company to produce financial documents and sales contract details. The SEC’s latest move, filed today, seeks access to Ripple’s audited financial statements for 2022 and 2023, as well as specific information on institutional sales contracts following the December 2020 complaint.
The regulator insists that the requested documents are crucial to determining appropriate sanctions and ensuring Ripple’s compliance with future regulations. The focus is particularly on Ripple On-Demand Liquidity (ODL) customers, who the SEC suspects may be subject to non-compliant sales practices. The SEC has invoked prior cases, such as “SEC v. Rajaratnam,” and court-approved “extended discovery periods” cases to counter Ripple’s objections to the relevance and timing of the information requests.
In a strategic move to prevent what it perceives as potentially non-compliant future institutional sales by Ripple, the SEC is seeking an injunction rather than questioning the legality of past sales. This approach indicates that the SEC is more interested in future compliance than past actions.
Legal analyst Bill Morgan has shed light on the implications of the SEC’s actions for Ripple, suggesting that the company may be forced to rethink its strategy of selling XRP, the digital currency central to Ripple’s ODL service. Any significant change in Ripple’s strategy could have a direct impact on its ODL operations.
Ripple has disputed the timeliness and relevance of these requests in relation to sanctions for securities violations, but is facing strong opposition from the SEC, which emphasizes their importance for deterrent consequences. With the discovery phase set to conclude on February 12, 2024, legal experts are discussing possible fines for alleged securities infringements committed by Ripple through institutional sales of XRP: estimates range widely from less than $200 million up to $3 billion, depending on Judge Torres’ decision to determine whether these sales constitute securities violations.
The price of XRP, the cryptocurrency at the center of the controversy, is $0.51231. Ripple’s response to the SEC’s requests and any adjustments to its operations could impact XRP’s market performance in the future.
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