Top US lawyer looks at Ripple’s battle with the SEC

“In normal circumstances, I think that Ripple would ultimately capitulate and reach a settlement early” says lawyer Matt Stankiewicz

On Monday, Ripple Labs, Inc.; Brad Garlinghouse, CEO; Christian Larsen, board chairman; and the U.S. Securities and Exchange Commission (“SEC”) filed a joint letter with Judge Analisa Torres in the Southern District of New York. While this letter is a general pre-trial filing to keep the judge abreast as to what’s going on between the parties, it sheds light on their respective mindsets. It also informs us, the captivated audience, of what to expect in the coming months.

The biggest takeaway is that the sides are not anywhere near a settlement agreement at this point, says Matt Stankiewicz, Managing Counsel at The Volkov Law Group.

Mr Stankiewicz’s perspective this morning is that the parties note that they “do not believe there is a prospect for settlement at this time.”

This is not too surprising given the proceedings are still at such an early stage. It was always unlikely that the two would reach a settlement agreement so quickly. I wouldn’t expect there to be much movement on settlement talks at least until each party issues a response to the complaint. At this point, both sides are surely confident in their positions, and Ripple is pushing for “rapid discovery schedule” in order to bring a swift summary judgment motion. Settlement discussions are unlikely to see much movement until the parties see how the judge responds to these motions.

As for the long-term outlook at a settlement, Mr Stankiewicz says that he won’t hold his breath.

“In normal circumstances, I think that Ripple would ultimately capitulate and reach a settlement early. Based on these early filings, I believe the SEC has a fairly solid case here and have some established precedent following a ruling in their favour against Kik Interactive Inc. early in 2020. That said, Ripple has a major interest – and most importantly, the resources – in pushing this case to the very end. A settlement could ultimately prevent the XRP coin from trading within the United States, and Ripple willy surely fight tooth and nail to prevent that from happening” he said.

“The circumstances around this case is a little unique as well, as the outgoing Trump Administration SEC initially brought the suit. Less than a month after the complaint was filed, the Biden Administration took over and brought significant turnover to the SEC. Ripple explained in the letter that much of its initial settlement discussions took place with directors that are no longer with the agency. I doubt much progress was made, but regardless, everyone is back at square one now” said Mr Stankiewicz.

“Outside of the settlement discussions, the letter also highlights a number of sticking points between the two sides. Most interesting to me is the SEC’s push to obtain communications that Ripple considers to be covered by attorney-client-privilege. The SEC is looking to obtain any communications and/or legal memos prepared by counsel. The SEC notes that these documents and communications are “central to the parties’ claims and defences.” The SEC has specifically highlighted two memos from counsel that review the regulatory status of XRP and apparently warn that Ripple’s XRP coin offering could be considered an “investment contract.” Ripple has understandably baulked at these claims, and the SEC notes they will consider a motion to compel” said Mr Stankiewicz.

“The SEC is currently preparing an amended complaint, which it expects to file by the end of the week. Garlinghouse and Larsen noted they are waiting for the amended complaint before filing their respective responses. We’ll continue to monitor this case going forward” he concluded.

Read this next

Digital Assets

Despite crypto winter, Cake DeFi paid out $58 million in Q2 rewards

According to its latest ‘Transparency Report,’ Cake DeFi continued its growth trajectory in the three months through June 2022, even as the entire crypto industry experienced macro challenges this quarter.

Retail FX

SimpleFX Review: Cryptos, Spreads, Pros & Cons

SimpleFX combines years of Forex and cryptocurrency experience with a focus on offering resources to retail traders. 

Retail FX

Ironbeam becomes CME clearing member and launches MT5

“The direct clearing aspect along with our low-latency proprietary trading tools and technology solutions make Ironbeam the ideal trading destination.”

Institutional FX

Top 0.07%: oneZero makes it to Inc. 5000 of fastest growing companies in America

oneZero started out by serving the foreign exchange trading community, developing and executing technology that could scale with the growth of the FX market.

Industry News

CFTC wins case against broker for secretly taking other side of client orders in block trades

“As we said at the outset of this case, the illegal use of inside or confidential information undermines confidence in markets and will not be tolerated.”

Technology

BankiFi raises $4.8m to bring embedded banking platform to North America

“Our mission is to make all aspects of cash management and payments easier for SMBs everywhere, and this investment is another huge step to making that a reality.”

Executive Moves

Shieldpay hires ex-Payoneer Chris Andrews as Head of Sales

“We’ll be expanding our position in existing markets and accelerating growth into new verticals, whilst building on our direct and indirect channels.”

Digital Assets

Crypto.com secures preliminary approval to operate in Canada

Crypto.com, one of the longest-established crypto platforms, has become the first digital asset platform to sign a Pre-‘Registration Undertaking’ with the Ontario Securities Commission (OSC) in Canada.

Retail FX

CySEC hits IC Markets One with regulatory warning

The Cyprus Securities and Exchange Commission has once again stepped up its fight against unauthorized brokers.

<